If you’re looking to invest in precious metals, you’re in luck. Now more than ever, elements like gold, platinum, and silver are showing their resiliency as hedges against inflation with the recent pandemic and the conditions it brought to the economies of the world. More and more people are putting money into long term stocks, and minerals like gold and platinum are becoming more attractive for investors.
By doing your due diligence, you’re already putting yourself one step ahead of many investors who blindly follow whatever their financial advisors say. In the world of precious metals, people see gold as the grandfather of all profitable investments. When you talk to someone on the street about precious metal IRAs or long-term investment plans, gold is the first thing that will pop into their head.
In this guide, you’re going to learn why platinum is cheaper than gold and which one is the right investment for you. You will also learn the differences between the two as minerals and as financial investments.
Gold vs. Platinum
Gold is an effective hedge against inflation because its value does not fluctuate depending on a country’s microeconomic activities. It is always desirable and precious wherever you go in the world, and people tuck away gold bars, coins, and trinkets to use on a rainy day, no matter their culture. Unknown to some, gold has a much younger, equally attractive sibling that has been catching the eye of jewelers and investors since the early 18th century: Platinum.
The word platinum comes from the Spanish term platina, which means silver. People have been using platinum as jewelry, currency, and even implements for alchemy long before financial instruments were a thing. Gold and platinum are both precious metals that naturally occur deep beneath the Earth’s crust, and people take them out with nearly identical mining methods before alloying or mixing them with the same metals before selling them to the public.
Platinum is becoming an increasingly popular option for precious metal investors who want to diversify their portfolios. Platinum is over ten times rarer than gold, and even though the mining processes for gold and platinum look the same, workers have to dig deeper to mine platinum. It also has to go through more advanced purification methods before becoming jewelry, coins, or bars.
A Snapshot of the Gold Market
Among all precious metals, gold is the belle of the ball. People in different countries take huge sums out of their savings accounts and prospective salaries to buy gold wedding bands, gifts, and IRAs. In the financial market, gold is popular among investors looking to make a quick buck and small, conservative investors who want hassle-free retirements.
A Hedge Against Inflation
Gold is a popular investment during times of economic turmoil, especially when index funds like the S&P 500, FTSE 100, and the NASDAQ Composite are crashing. Unlike gemstones that offer very little use apart from being bodily ornaments and embellishments on furniture and houses, you can find gold in computers, smartphones, and televisions. Gold is famous for having many industrial applications, and people even use it as a food additive as it can be eating in small quantities.
Even though a large portion of gold’s value is heavily reliant on its use in consumer electronics, appliances, and architecture, it doesn’t seem to move with most macro and microeconomic trends. For example, in the stock market crash of 2008, gold’s value came to a paltry $775 from a lofty $1000 per troy ounce. However, as the country went through the worst recession it has seen in 100 years, gold prices began to recover, eventually hitting a record high of nearly $1900 per troy ounce in the fourth quarter of 2011.
Traditionally, gold prices go on an upward trend in the aftermath of an economic crisis, and many times, even in the middle of one. More than half of the global demand for gold comes from jewelry, so it’s only natural for gold’s market value to depreciate when the prices of commodities crash. However, when investors stop panicking and begin making rational decisions again, its value begins to restrengthen, often surpassing what it was before the crisis.
Most analysts and investors view gold as a store of value since the global supply and demand level has no impact on its mid- to long-term market price. The immediate value of gold depends on the opinions and perspectives of institutions and individuals that use it as a rainy-day fund. When a country is doing well, people typically sell gold to put money in riskier stocks and financial instruments, but when the economy tanks, they buy gold in a frenzy, which leads to a rapid recovery in market value.
A Snapshot of the Platinum Market
If you look at a pyramid chart that indicates the value and rarity of precious metals, platinum sits near the top with gold and rhodium. Rhodium is more expensive than gold and platinum, while platinum is more valuable than gold in some markets and nearly 50 times what silver is worth. Platinum is more difficult to mine than gold and more than twice as rare, as many experts believe that the global supply of platinum can fit inside an average living room.
The Many Uses of Platinum
Not unlike gold and silver, platinum is also used in a variety of commercial and industrial applications. Most cars and motorcycles that conform to European emission standards have some platinum in their catalytic converters because it can remove the harmful toxins in exhaust gases before releasing them into the outside world. Platinum is also present in dental instruments, turbine engines, and decorative plates and frames.
Platinum, like gold, is a highly malleable mineral when it’s fresh from the ground. However, it only comes from two global sources: South Africa and Russia. This limitation makes it a riskier investment when compared to gold, which importers can source globally. South Africa provides over 75% of the world’s platinum supply, and automakers from India and China take up the lion’s share of consumption.
Any geopolitical unrest between South Africa, Russia, and the United States can cause platinum’s value to drop. Russia and South Africa can work together and inflate the price of platinum, which will cause automobiles, dentist appointments, and oil to increase in price all over the world. However, you may find a saving grace in platinum’s intrinsic value as platinum bars, coins, and accessories will remain precious regardless of world politics.
Platinum’s price is more demand-based than gold, and investors see platinum in the same vein as aluminum, silver, and other industrial metals. If a country’s economy is booming, the demand for platinum will grow, which will lead to an increase in its market value. However, when demand for heavy machinery, turbine engines, and consumer vehicles decreases, platinum prices will begin to fall.
Why Is Platinum Cheaper Than Gold?
When you look at a long-term price comparison graph of gold and platinum, you will notice that they generally move in one direction even though people buy them for different reasons. These reasons become clear during times of economic uncertainty, where gold’s fame as a safe-haven investment comes into play. As demand for cars, trucks, and planes decreases, platinum prices go down with it, while gold quickly rebounds after the initial shock of a market crash.
In Q3 2020, you could buy gold at $1851 per ounce and platinum at $957.40 per ounce. Historically, platinum has always been more valuable than gold. However, in a world of pandemics, trade wars, and the increasing tensions between manufacturers, their employees, and foreign governments, gold appears like a more sensible investment for most people.
It’s not uncommon to see platinum trading at a premium over gold, but those instances are becoming rarer and rarer. That’s not to say that platinum is not a good investment—quite the contrary. Platinum is a highly liquid asset that you can easily exchange for cash anywhere in the world, just as you can buy and sell gold in any country you visit.
As of this writing, you will need 1.6 units of platinum to purchase one unit of gold, which makes platinum a more cost-effective and attractive option, although it’s a bit riskier. Because platinum relies heavily on industrial demand, its value on a line graph bounces up and down more frequently than gold, meaning it’s a volatile investment that you should be cautious about when looking for long-term profits.
In 2015, the United States Environmental Protection Agency caught Volkswagen cheating on their diesel emissions tests. The scandal led to a decline in demand for diesel engines, which cut platinum prices by nearly a fifth. Platinum is cheaper than gold because it plays by the rules of supply and demand, while gold is heavily reliant on personal sentiments, and people have always seen it as a safe-haven investment.
Want To Know More About Gold and Platinum Prices?
If you want to know more about gold and platinum prices, reach out to Oxford Gold Group by calling one of our experts at 833-600-4653 and seeing which metal is right for you. Take advantage of the recent economic climate by investing in gold or platinum IRA and take control of your future. When it comes to making investments, time is of the essence, and there’s no better time than today.
