Platinum and gold are both precious metals that investors can consider adding to their portfolios. However, their price performance and return potential can differ significantly. This article compares investing in platinum versus gold, analyzing factors like current supply and demand dynamics, price charts over time, and future return projections. Ultimately, the analysis shows platinum likely offers higher return potential than gold in the years ahead.
Platinum has faced a decade of deficits while gold is amply supplied
Over the past decade, the platinum market has been in a state of consistent deficits – meaning annual demand has exceeded available supply. In contrast, gold remains well supplied with healthy mine production and recycling flows. This supply backdrop suggests platinum prices have more room to appreciate in the years ahead as deficits persist.
Automotive demand will be key driver for platinum
A major source of platinum demand comes from catalytic converters in diesel vehicles. As emission standards tighten globally, platinum use in autocatalysts is expected to accelerate. With the auto industry transitioning to hydrogen fuel cells over the longer term, this will provide another significant driver of platinum demand.
Platinum has already broken out from a multi-year base
Examine the platinum versus gold price chart over the past decade. Platinum bottomed around $800 in 2018 after a prolonged bear market. But it has since broken out above $1000 and started a new bull run. In comparison gold has seen muted gains over the past five years coming off its 2011 peak. Platinum’s outperformance confirms it offers superior return potential going forward.
Platinum remains undervalued relative to gold
On a historical basis, the platinum/gold ratio averaged around 1.0, meaning platinum traded at parity with gold. But today the ratio sits near 0.6 even after platinum’s recent breakout, indicating meaningful undervaluation relative to gold. As this ratio mean reverts higher, it signals substantial upside for platinum prices.
In conclusion, current platinum market fundamentals of low supplies and recovering demand, alongside bullish technical price trends, support the thesis that platinum will outperform gold in the years ahead. Platinum represents the more attractive precious metal investment today based on higher return projections.