Is platinum better than gold?

While gold is certainly considered the most popular precious metal to invest in, the growth of platinum in recent years has left some wondering if it better than gold. Like silver, platinum reacts differently to economic conditions than gold, so at certain periods it can certainly be better than gold. Below we discuss in more detail on the differences between these two metals.

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Platinum vs gold?

Throughout history platinum has tended to be more expensive than gold and is generally considered to be the most valuable metal of the two. This has changed in the past decade however, with gold typically higher per ounce vs platinum.

Culturally, there is a hierarchy amongst the precious metals which roughly translates into their material value. At the top of this tree sits platinum, the shiny white metal which is recognised globally as an even higher symbol of quality and value than gold. Anyone who has walked into a jewellery shop will be aware of the difference in price between platinum and gold jewellery and in the music industry the title ‘platinum’ is given to an album that has been sold more than 1 million times.

Platinum has its reputation for a number of reasons - there is less platinum in the Earth’s crust and it is also more difficult to extract with only a few hundred tonnes of platinum being mined every year.

In terms of its abundance on the planet, then, platinum should always be more valuable as it is much rarer. However the price of metals doesn’t work like that and while, in theory, platinum should arguably be worth more than gold, this is not necessarily always the case.

Like any other asset, the value of precious metals is determined by supply and demand – forces which are not fixed and can rise and fall depending on the performance of the wider economy. Platinum differs from gold in that it has a much larger range of industrial uses, meaning its value fluctuates in a way that resembles an industrial metal much more closely than it does a precious one. This means that its value will typically show a closer correlation with the performance of the global economy.

A huge percentage of platinum’s industrial demand comes from the motor industry, which uses the metal in catalytic convertors to reduce emissions. The high price of platinum however saw its use decline as manufacturers instead switched to palladium. As a result, the price of platinum fell, while palladium rose. Some investors believe that this may switch once more, with palladium becoming too expensive and car makers reverting to the old system with platinum, giving the metal it's chance once more.

Click here for more information on investing in platinum.

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Is platinum better than gold for investments?

The gold - platinum ratio is a good way to observe the relationship between the two metals’ prices. When the ratio is above 1 it means that platinum is cheaper than gold. A savvy investor can use this ratio to find opportunities to profit from choosing to invest in one metal over another.

Click here to view the Gold - Platinum Ratio.

Each metal has it's own strengths and weaknesses. Gold is VAT-free and can typically be bought much closer to spot price, helping to maximise your returns. Platinum does require VAT to be paid, and has a higher premium, but has the potential to go up in price much quicker thanks to it's reliance on industrial demand. A surge in demand could quickly see the platinum price rise to previous highs, or even higher.

Of course, the savviest investors will typically own both platinum and gold, diversifying their portfolios and benefiting from both metals when each is at their best.