Platinum: Better than Gold?

Focus: COMMODITIES

Luke Burgess Image Luke Burgess Editor, Energy and Capital

The price of gold has moved considerably higher over the past few weeks. And while the yellow metal is still very well positioned to continue gaining, platinum could be set for even larger growth, suggests Luke Burgess, editor of Energy & Capital.

Simply put, platinum has never been so undervalued — ever. At just over $950 an ounce, platinum is trading at a near all-time discount to gold.

Meanwhile, the market is faced with serious platinum supply deficits that almost promise to send prices much higher from here. And for the few investors who recognize the opportunity and take action, large gains seem quite likely.

The World Platinum Investment Council reports that 2017 will be the sixth consecutive year that global platinum demand will outstrip supply! And it forecasts a continually widening supply deficit through 2020.

These supply deficits are simply the result of platinum's scarcity. It's a very rare metal. Platinum is about 20x rarer than gold. Only about 250 metric tons of platinum is produced annually worldwide. Compare that to the 2,800 tonnes of gold mined globally every year.

To add to the supply problem, the majority of the world's platinum resources are highly concentrated in geopolitically unstable regions. Approximately 80% of all platinum production is based in just two countries: South Africa and Russia.

And, unlike gold, platinum is an important industrial metal. More than 60% of the world's platinum demand is industrial. Platinum is a key material for the production of catalytic converters, which have been a standard and regulated part of vehicles since the 1970s.

As a result of all this, platinum prices have spent most of the past 45 years trading at a premium to gold.