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Gold vs Platinum: Which is a Better Investment?

27 May 2021 - Investing Information

Deciding whether to buy gold or platinum is a difficult decision. Both metals are subjected to volatility, and have had significant price movements in the last 24 months. However, before deciding which metal is a better investment, it is essential to learn a bit more about gold and platinum.

To begin with, let’s ask the question: What is gold? Gold is a precious metal that is produced and mined primarily by three countries: Russia, China and Australia. Gold is used in a plethora of industries ranging from the jewelry industry to dentistry. Gold can also be purchased as an investment, and is considered to be a safe haven against inflation. Many central banks worldwide have significant gold reserves which are used to help stabilise fiat currency. 

What is platinum? Approximately 190 tons of platinum are mined each year, mostly in South Africa and Russia. Mining platinum is much more time consuming and costly compared to mining gold. Platinum is primarily used in the automotive industry for catalytic converters, and China is the world's most significant platinum importer.

It is important to consider which metal would be a better choice for you portfolio, and there are many factors to consider. In terms of prices, Gold is currently at a near all time high, priced at around $1850 / oz. Platinum, on the other hand, is trading at around $1200 / oz, siginificantly lower than its all time high of $2250/ oz. Given the high rate of global inflation, the purchasing power of the money has decreased. Gold, however, gold acts as a hedge against inflation. Instead of facing devaluation in its value, gold prices rise with the prices of everything else. Gold also acts as an excellent store of value. How can gold benefit your portfolio in times of deflation? As the purchasing power of money spikes, and the prices of commodities seem to drop drastically, the gold price normally doesn't fall. This is caused by people who hoard cash during these periods, making gold a safer bet.

There are also many reasons to consider buying platinum bars and coins. Traditionally, platinum is priced siginifcantly higher than palladium. This however, has not been the case recently. Platinum is currently trading at prices significantly lower than palladium, which is reaching all time highs. Platinum is a rarer metal than gold, and its annual production is approximately 3% of that of gold. Many investors consider that, given the economic climate at the moment, platinum is undervalued. This means that it has the potential to increase in value. 

For investors who have adequate funds, taking a position in both gold and platinum would also be a wise investing option. Both metals have seen extreme price movements in the last 24 months, and may benefit a diversified portfolio in the long term. 

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