Gold: Why gold is now 2.5 times more expensive than platinum

Unlike gold, platinum does not shine in the markets

(BFM Bourse) – Week after week, gold breaks new records. This is not the case for platinum, its rival among the precious metals.

An ounce of platinum was priced at less than $920 this Tuesday, while the same amount of gold fetched about $2,280, more than two-and-a-half times higher. Such a difference is unheard of in the markets. It must be said that since the early 2010s, the price movements of these two precious metals have diverged.

While gold, despite occasional declines, has seen a steady rise in value for more than half a century, this has not been the case for platinum since the 2008 financial crisis. And since 2012, the gap between the two prices has widened. Continued to widen.

How to explain it? Gold has benefited from the ever-increasing demand in recent years. This rule applies to jewelry and its physical uses in industry, but also because central banks, particularly Russian and Chinese, are hoarding more and more of it.

Gold absolutely plays its role as a safe haven during periods of uncertainty. The war in Ukraine, tensions in the Middle East, China’s threats on Taiwan… the geopolitical context is forcing investors to bet on gold. Not to mention inflation, which, despite falling within the euro zone, affects a record number of countries.

Decrease in demand of industries

Platinum is not in the same boat. It is certainly thirty times rarer than gold. Except the price of raw material depends not only on supply but also on demand. And the main buyers of platinum need it less and less. Industrially, platinum is mainly used to make catalytic converters.

However, with the rise of electric cars, fewer exhaust pipes are produced. Eventually, the automobile industry will again need platinum for hydrogen cars, but not now. As for central banks, they are not in the habit of storing platinum bars in their vaults.

A special case remains of jewelry stores that continue to sell platinum rings and bracelets at higher prices than equivalent gold models…

Certainly the production costs are not the same: gold melts at significantly lower temperatures, platinum is used almost pure, and its much larger mass means that it weighs more for the same size. But jewelers also benefit from the collective imagination that places platinum above gold. Enough to allow them to generate more appreciable margins than gold.

Pierre Kufferman

©2024 BFM Bourse

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