Platinum and gold: a race to change places?
This situation is a rare phenomenon in the precious metals market: since the very beginning of 2015, platinum has been cheaper than gold. As anyone with a platinum credit card or platinum club membership knows, it's usually the other way around. The situation where the price of platinum is lower than the price of gold has been observed only a few times in recent decades. In most cases, the white metal immediately caught up.
However, this time the price difference is especially obvious: platinum costs $980 per troy ounce, while gold costs $1,100 per troy ounce. Thus, the platinum to gold ratio is only 0.89.
Precious metals (primarily gold) are traditional instruments for preserving capital.
However, in what form (physical or otherwise) and where should you buy metal? Read in detail: Invest in gold in Switzerland: what do you need to know?
History of the discovery and use of noble metal
When developing alluvial gold deposits in Colombia in the 16th century, a metal resembling silver in appearance was mined along with solar metal. Such gold particles could not be purified from platinum, which means “bad silver” in Spanish.
Platinum was known to the ancient Incas, and in Rus' coins were minted from it
For a long time, the chemical element could not be used because there was no technology for processing it. And only in 1780, King Louis of France called the reliable and unchanging metal the only one worthy of kings.
Before the release of the first official platinum coins, the metal was added to alloys with gold and copper as a ligature with a high specific gravity. Due to their physical properties, the weight of counterfeit coins, which were passed off as originals, increased.
The platinum of counterfeit coins and original ones differs in density, which is determined by hydrostatic weighing. Genuine coins in most cases have the property of noble metal to magnetize.
The first official issue of platinum currency was carried out in the Russian Empire. The coins were in circulation from 1828 to 1845, and they were minted from Ural platinum, not purified from iridium and palladium impurities. This choice was due to the discovery of a new chemical element in Siberia.
Along with the minting of coins at that time, wire, crucibles, medals, ingots, and bowls were made from platinum. Products made of refractory metal have not found their way into everyday life due to their high cost.
Platinum price factors
Platinum is a rarer metal than gold. Just as with diamonds, the price includes the generally accepted view of platinum as a precious metal. And if the price of this precious metal is lower than that of gold, then some investors view this as a signal to buy. Past developments confirmed the correctness of this thesis.
The dynamics of prices for both metals depends, in fact, on several factors. For example, at the end of 2008, the described price ratio returned to its previous level within a couple of days. The next time it lasted much longer: at the end of 2011, the price of platinum surpassed the price of gold and fell again only at the beginning of 2013. Low platinum to gold ratios are often observed during crises when investors buy gold.
This time, the return to normal market prices may take longer. In July 2015, the price of platinum dropped below US$1,000 per troy ounce, a level last seen in 2009. Then, let us remember, the American investment bank Lehman collapsed.
Compared to 2014, platinum has lost 35% in price. The situation also affected a metal close to platinum – palladium, the price of which dropped to its lowest level since 2012. Palladium is obtained as a by-product in the mining of platinum and nickel. What makes both metals similar is that they are used in the automotive industry in catalysts to neutralize exhaust gases. Platinum is primarily used in diesel vehicles; cheaper palladium is used in gasoline-powered cars.
Analysts attribute the price decline to the weak automobile market. Diesel cars are no longer as in demand as before. Technical progress has led, among other things, to the fact that less platinum is used in catalysts. It has gotten to the point where platinum is not as in demand for precious jewelry in China, its most important market.
At the same time, more and more platinum is entering the market, which - unlike such a mineral as coal - cannot, metaphorically speaking, “fly down the drain unnoticed.” In other words, platinum reserves are constantly accumulating. Nobody knows how big they are. There are, however, guesses that we are talking about significant reserves. This became clear in 2014: despite a five-month strike in South African mines, the price of platinum did not rise then. Recall that South Africa supplies approximately three-quarters of the world's platinum supply (for reference, Russia supplies the market with the largest amount of palladium).
How is platinum different from gold?
Both precious metals are located next to each other on the periodic table.
Differences:
- atomic mass;
- density.
For Pt it is 21.5 g/cm3, and for Au it is only 19.3 g/cm3.
This means that an item made of gold, equal in volume and shape to one made of platinum, will weigh 10.23% less. This difference makes platinum products that are identical in appearance more expensive than their gold counterparts.
Expert opinion
Vsevolod Kozlovsky
6 years in jewelry making. Knows everything about samples and can identify a fake in 12 seconds
A criterion that directly affects the cost is a special mark - a sample, which is stamped on the product by the assay office after examining product samples for metal content.
Traditionally, gold jewelry in Russia contains varying amounts of this element. Products that contain:
- 375;
- 500;
- 583;
- 585;
- 750;
- 958;
- 999 parts of gold.
The most common are products containing slightly more than half of pure gold from the total weight of the product - 583 (Soviet standard) or 585 (Russian standard).
Based on these fixed values and the spatula shape of the mark, it is very easy to determine what kind of metal we are talking about, without even considering the color.
For platinum there are fewer samples. There are only 3 of them:
- 850;
- 900;
- 950.
As can be seen from the values, a piece of jewelry always (with the exception of items made of 999 gold, which are practically never found on sale) contains more precious platinum. Therefore, jewelry made from it is more expensive than gold.
At home, it is almost impossible to determine the authenticity of precious metals. A thick layer of gold plating or platinum plating negates all the efforts of home experimenters. In the worst case, it leads to damage to the jewelry.
Both metals are quite inert. That is, they do not react with most household substances at room temperature. This is their currency value. If they are not exposed to extreme factors, they can retain their unchanged appearance and weight for centuries.
Here's what works for them:
- In order to dissolve Au, “regia vodka” was invented - a mixture of nitric and hydrochloric acids in a ratio of 3:1.
- Pt is less resistant to chemical reagents and dissolves freely in pure hydrochloric acid in the presence of air.
This does not mean that this metal is less inert. The property of Pt to accelerate chemical processes while remaining unchanged is widely used in catalysts. Industrially, platinum is more valuable than completely inert gold.
Platinum price forecast
Mineral prices have recently reverted to the long-term real average. According to statistics covering a period of time up to the 40s, the long-term value of the price of platinum is between 900 and 950 US dollars. Many experts point out that the falling price of platinum has not yet reached its minimum value. Accordingly, it is possible that in the future platinum will cost even less.
K.S.: Why is platinum cheaper than gold?
Focus:
Gold Palladium Platinum
Areas of application of platinum
Platinum has a wide range of applications, primarily in jewelry and the production of automobile catalysts
- Platinum and other chemical elements of its group are widely used in technology due to their high strength indicators. Equipment and utensils that are resistant to acidic environments are made from metals.
- Platinum is used as a catalyst in the processes of chlorination and hydrogenation of products for the pharmaceutical industry. It is used in the technological process of producing high-octane gasoline and producing paints.
- Thanks to practical research, it has become possible to use alloys based on a noble chemical element in medicine in the manufacture of prostheses and crowns.
- If you compare mirrors with aluminum and platinum coating, then visually there are no differences between them. But thanks to platinum, unusual mirrors are transparent, and they are used for observations in casinos and the police.
- The areas of application of the precious metal are diverse; it has no analogues in the aviation industry and the construction of power equipment. This fact influences the increase in world demand for precious material.
Where to open a platinum compulsory medical insurance
In many Russian banks you can open an impersonal metal account. You can constantly monitor the current price of platinum and, depending on its fluctuations, it is profitable to buy or sell the metal, making a profit. The period for placement of compulsory medical insurance is not limited, interest is not charged on the balance. Profitability depends only on price fluctuations. If your platinum coins or bars can be stolen, then an impersonal metal account is guaranteed to be protected from this. Even after a dozen or more years, the amount of metal you own will not decrease. Only its cost will change.
For example, if you bought 57.8 grams of platinum in 2021 at an average price of 1,730 rubles / gram, spending approximately 100,000 rubles, then having sold this metal to Gazprombank in 2021 at the rate of 1,722 rubles / gram, you would receive only 99 thousand 537 rubles, having lost 463 rubles from their investments. Thus, in the short term, the return on investment in platinum may be negative.
Is investing in platinum profitable at all?
It is possible to use platinum as an investment instrument. However, this noble metal is highly dependent on industrial and economic risk factors. The benefits of investing in platinum can only be ensured by financial stability or production growth, which stimulates an increase in demand for this precious metal. Troubled, crisis times entail falling prices. At the same time, by waiting for the price minimum, you can purchase platinum profitably. Earth's reserves of this metal are limited and non-renewable. As a result, when they are exhausted, the cost will rush up. However, it is not worth choosing platinum over gold in the long term of one human life.
It is better to have both of these precious metals in your investment portfolio. Manufacturing and technological progress will continue to drive platinum prices higher. But now, to save savings over the long term, it is better to traditionally resort to good old and reliable gold in the form of coins or other physical form.
Related links:
- Why are millionaires and central banks buying gold?
- Monetary stimulus from A to Z
- What is the best way to invest money in gold?
