When comparing platinum vs gold for investment purposes, there are several key factors to consider. Platinum and gold are both precious metals that have long been valued for their rarity and diverse applications. However, their price performance has diverged significantly in recent decades. Looking at a platinum vs gold price chart shows that platinum once traded at over a 2X premium to gold in the early 2000s when platinum supply constraints were most acute. However, platinum now trades at nearly a 30% discount to gold. This creates a compelling investment case for platinum based on its greater upside potential compared to gold.
Platinum has underperformed gold significantly since 2011
One of the most important insights from analyzing a platinum vs gold investment chart is the major divergence that has occurred since 2011. In 2011, platinum traded at a $1,800/oz premium to gold. However, platinum has significantly underperformed since then. By 2015, it crossed below gold for the first time in over a decade. Platinum now trades nearly 30% below gold at around $930/oz compared to gold at $1,860/oz. This dramatic reversal of the platinum-to-gold ratio since 2011 highlights platinum’s deep undervaluation compared to gold.
Platinum demand growth has lagged gold but is recovering
A key driver of platinum’s underperformance vs gold has been slower demand growth. Platinum demand is heavily dependent on the automotive sector which accounts for over 40% of total demand. Diesel vehicle demand in Europe has declined sharply since the 2015 Volkswagen emissions scandal. However, platinum automotive demand is forecast to recover as emissions standards tighten for diesel and gasoline engines. Additionally, platinum jewelry demand in China is forecast to grow steadily. Overall, while platinum demand growth has lagged, it is recovering which supports the investment case.
Platinum supply deficits position it favorably vs gold
Unlike gold which has a high above-ground stockpile, platinum relies heavily on annual mine production to meet demand. Platinum has been in a state of supply deficit for the last several years as mining output has contracted. The platinum market deficit is expected to continue as mines in South Africa face structural decline. With platinum demand growth recovering and mine supply still constrained, deficits could persist for years driving prices higher to rebalance the market. This contrasts with gold which is approaching a state of equilibrium between supply and demand.
Low correlation to stocks enhances platinum’s portfolio diversification benefits
Platinum also offers compelling portfolio diversification benefits relative to gold. Platinum has a very low historical correlation to the S&P 500 equity index. Over the past 20 years, platinum’s correlation to the S&P 500 has been near zero at 0.04. This compares very favorably to gold’s 0.28 correlation over the same period. With platinum showing resilience during past equity bear markets, it can provide critical diversification and downside protection.
In summary, analyzing the platinum vs gold investment chart shows platinum is deeply undervalued relative to gold based on historical trading ranges. With platinum demand growth recovering, ongoing supply deficits forecast, and minimal correlation to equities, platinum offers attractive upside potential and portfolio diversification benefits compared to gold.