Published: 2019.07.16. The ratio of the rate of platinum and gold: history and prospects

The ratio of the rate of platinum and gold: history and prospects - Preview

For 40 years, platinum has been more expensive than yellow precious metal, but in recent years, the price ratio of these two precious metals has radically changed to exactly the opposite. Why did this happen and what are the prospects for further dynamics?

Prior to the liberalization of the gold market and the folding of the Bretton Woods gold standard during the 1970s, the average rate of the yellow precious metal was $ 35.94 and platinum - $ 151.67 per troy ounce. Thus, the gray metal was four times more expensive than yellow.

By 1980, the relationship of the dollar with gold was interrupted for almost a decade, so gold went up to $ 612, and platinum was estimated at $ 677 per ounce, that is, the difference between the two metals has almost disappeared. In 1990, after a decade of correction in the market, the yellow metal dropped in price to $ 383. Platinum was luckier, so her course was near the mark of 466 dollars.

In 2000, the yellow metal fell again, now to $ 279, and platinum increased and stood at $ 544, thereby almost twice the price of gold. 2008 was a record year for platinum, whose rate exceeded $ 2,000 per ounce, and the average annual price for it was $ 1,573. Subsequently, platinum fell again, and it was not destined to rise to the heights of 2008. At the same time, gold in 2008 reached $ 1,000 per ounce for the first time in its history, showing an average of $ 871 per year.

It is worth noting that gold usually outstrips platinum when investors begin to doubt about political and economic stability, and the reverse movement occurs during a period of stabilization of the economy and high confidence in the financial system. That is why the ratio of gold to platinum grew during the boom in the yellow metal market in the 1970s and 2000s, and declined in the bearish cycle in the 1980-1990s. Thus, it can be said that the ratio is a useful indicator of investor sentiment and the current political and economic situation.

It is noteworthy that both metals crossed in price at the same level - about $ 1,680 on January 23, 2013. However, since then platinum has been falling in price, and now amounts to $ 800, and the gold rate is $ 1,400. This means that their ratio is 1.75. Consequently, the yellow metal and platinum changed places in terms of their ratio, recorded 40 years ago.

The main reason for such a sharp reversal of the ratio was the so-called “dieselgate”. The fact is that in 2015 there was a scandal because of the falsification of data on exhaust emissions of diesel cars by Volkswagen Corporation. Platinum is used in catalytic converters of automobiles, purifying exhaust gases from particularly harmful impurities (for example, from nitric oxide). “Dieselgate” led to a reduction in the market for diesel cars, and hence the demand for platinum, which was reflected in the fall of its course, and led to the formation of a surplus (physical surplus due to unsold metal).

However, in the World Platinum Investment Council forecast growth in investment demand for gray metal. For example, in the first quarter of 2019, the volume of shares in platinum exchange-traded funds increased to 690 thousand ounces, and aggregate investment demand amounted to 765 thousand ounces due to sales of platinum coins and bars (with an aggregate demand volume of 2.560 million ounces). At the same time, a recent report on the platinum and palladium market from GFMS indicated that the platinum rate would increase slightly this year, but one can hardly expect a significant decrease in the ratio with gold, since the latter is becoming more expensive due to global geopolitical and economic problems and demand for defensive assets.

The yellow metal is more of an investment asset, and platinum is industrial, which ultimately determines the growth of the ratio between these assets towards gold against the background of the completion of the current economic cycle. However, one should not forget that platinum is a more rare precious metal than gold, since it is 15 to 20 times less in the Earth’s bowels, which means that the gray metal is currently heavily undervalued.