You’ve heard us go on about the gold-silver ratio a time or two. And how it seems to indicate the silver price could still have some way to climb.
Well today, we’d like to show you this chart…
Some investors see the gold-platinum (or platinum-gold) ratio as a fear indicator. Because as pessimism about the market and economy creeps up, investors flock to gold. And that shortens the gap between the gold and platinum price.
Right now the gold-platinum ratio is sitting at 1:0.99. But it was at more than 1:1 a little over a week ago.
The last time the ratio was at 1:1 was 2008. It took off right around 15 September… When Lehman Brothers collapsed…
A feat it hadn’t achieved since 1996…
There’s a widely held belief that when gold trades at or above the platinum price it’s time to swap gold for platinum.
A similar philosophy saw investors swap silver for gold earlier this year.
Now let’s look at a longer-term chart. This time the metals are reversed so we’re looking at the platinum-gold ratio (we hope this isn’t getting too confusing). Since 1975, the platinum-gold ratio averages around 1:1.5 – that is, one-and-a-half ounces of gold was equal to one ounce of platinum.
And in the last 10 years, that average has been closer to 1:2.
So with gold and platinum trading almost at par, should you swap your gold for platinum now?
Well, if the ratio were to revert to the mean, you could make some nice coin pretty quickly.
And platinum is rare. Annual production is currently around six million ounces a year. (That amount of platinum would fit in a box measuring two metres on each side.)
In fact, according to an article on gold-eagle.com, ‘all the platinum ever mined would fill a basement of less than 25 cubic feet’!
However, platinum is more than a precious metal due to its high industrial use – most platinum is used in the auto industry for catalytic convertors.
If you’re positive on the outlook for the global economy, then selling gold and buying platinum could be the trade. Or it could even be a way to hedge your precious metal exposure using another precious metal.
Either way, the relationship between gold and platinum is worth keeping an eye on.
Aaron Tyrrell
Editor, Money Morning
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From the Archives…
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2011-08-18 – Kris Sayce
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2011-08-17 – Kris Sayce
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2011-08-16 – Kris Sayce
Two Decades of Boom and Bust
2011-08-15 – Kris Sayce
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{ 1 comment }
might wanna check the stats and measurements there, a box (cube) with sides 2m=8 cubic metres, thats somewhwat more than 25 cubic feet.
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