Platinum Bars vs. Gold Bars

Gold Bar vs Platinum Bar Facts and Premiums

Precious metals have been valued assets for thousands of years. They are one of the few investment assets that are tangible, and thus retain their value against any variances found in fiat currency. There is likely no better way to guard against inflation than through metals like gold and platinum.

However, there is a debate among investors about which metal is a better use of investment money. We are going to discuss the facts surrounding this debate on this page so that you can decide for yourself.

Why Buy Gold?

Gold is the quintessential precious metal. The yellow stuff is the first thing to come to mind when the subject arises, and for good reason. If you’re wondering whether you should buy gold, consider the following benefits:

• Gold has been recognized as an object and store of value for thousands of years. History indicates that the Lydian civilization extracted bullion as a valued item in 6th century BC. Furthermore, every civilization since, no matter where it existed, has recognized the yellow metal as a tangible sign of wealth.
• Gold’s value tends to increase in the face of economic uncertainty. As things get worse, investors increasingly look to gold to safeguard their net worths. The increased demand makes for higher prices and benefits those who already have gold in their possession.
• Gold can never inflate. Fiat currencies become less valuable with each new note printed, but gold’s value stability never changes and is unaffected by inflation itself. If anything, gold becomes more valuable in times of high inflation by virtue of its measurement in terms of the inflating currency.
• Gold doesn’t behave in the way other assets do. Stocks, bonds, and other financial investments rely upon the economy’s health to appreciate. Thus, they tend to decline as the economy depresses, and gold offers a way to diversify the risk of one’s portfolio against the whims of the market.

The performance of gold’s spot price has been nothing short of remarkable in the past few years. However, even long-term views of how much gold is worth reveal a steady upward trend – so long as government controls aren’t in place to arrest its free market pricing. Since the US abandoned the gold standard for good in the 1970s, gold has never stopped its rise.

Why Buy Platinum?

Understandably, you might be wondering why you’d buy platinum if gold is so great. As it turns out, platinum appeals to a different set of investors. Some of their goals are the same as gold investors’ goals, but there are also some critical differences.

• Platinum is universally recognized as a store of value in the same way as gold, albeit not as readily. Its appearance and relative rarity have cemented it as a “fancier” silver, which explains why it is so commonly used for jewelry and other keepsakes. Investors are, by no means, making their net worths less secure by investing in platinum.
• The demand for platinum is guaranteed to remain at certain levels due to its use in industry. In particular, platinum is a key component of catalytic converters on automobiles, which reduce emissions and make the cars more environmentally friendly. As the trend towards cleaner cars continues, expect platinum to remain a hot item.
• Platinum’s rarity has sometimes resulted in its value equalling or surpassing that of gold. Thus, it is possible that platinum investors might find themselves faring better than gold investors if the gold-platinum ratio drops below 1:1 in platinum’s favor.
• Investors who are more risk-tolerant may prefer to try and ride platinum’s volatility to short-term gains. Platinum’s lower trade volume and liquidity make its spot price much more susceptible to significant swings, and the savvy trader can make a lot of money if they can read the tea leaves and time the market properly.

Right now, platinum is significantly less expensive than gold, but is much more expensive than silver. Thus, it can represent a sort of balanced option between the two for investors who want to spend a bit more, but not an arm and a leg. Because of its volatility, it can also add some diversification against gold or silver, too, and it may move at different times than the two more popular metals.

Key Considerations for Investors

Gold Prices vs. Platinum Prices

Gold prices have exceeded record highs numerous times just in the past few years. Platinum, for its part, has mostly stayed at the same price level during the same period of time.

As a result, a casual observer could easily make the mistake of believing that gold has always been more valuable. However, there have been definite times when platinum’s value surpassed that of gold in times past, so the relationship between the two isn’t as black and white as it seems. If you look at our historical price chart for gold and price chart for platinum, you’ll read a much more varied story.

Gold’s value has largely been bolstered due to its popularity as an investment vehicle for central banks and other sovereign government entities. Needless to say, the yellow metal also retains its demand for jewelry, and that is unlikely ever to change.

At the same time, gold mining continues to proceed steadily and keep the supply of gold flowing without major disruptions. So, the price of gold has been quite stable overall, and has moved higher over time with little deviation. In fact, its rises are roughly predictable, as they correspond with economic downturns and/or periods of high inflation.

Platinum, on the other hand, is a much more mixed bag. Though there is fairly stable demand for platinum from industry – as we said, it’s a key component of automotive catalytic converters – its supply is much less assured. The largest producer of platinum in the world is South Africa – by far.

Thus, disruptions to mining operations, regardless of their reasons, have yielded skyrocketing platinum prices. In 2008, South Africa experienced a wave of power outages that crippled its ability to export platinum. Thus, between March and May 2008, platinum surpassed $2,000/oz several times and achieved its record high price of $2,189/oz – a record that stands to this day.

Platinum was also consistently pricier than gold in 2011 due to geopolitical unrest in South Africa, and labor strikes in 2014 and 2015 led to the two metals trading places in value many times.

In short, the price of platinum is far more dependent on its supply from South Africa than gold is from its producing countries. Gold, though certainly a rare find, is much easier to locate than platinum.

Factors that Influence the Price of Gold and Platinum

Of course, there are certain factors that can influence the prices of both gold and platinum at the same time. Many of those factors speak more broadly about the role of precious metals in investing.

• Both metals tend to gain value during periods of economic instability as citizens and governments look for ways to secure the value of their holdings.
• Both serve as a hedge against inflation for the same reason, though gold’s value is affected more directly and profoundly by inflation than platinum’s price.
• Political changes of policy or leadership can also affect both metals, particularly in Russia (a top producer of both) and the United States (world’s biggest economy and top producer of both).
• Geopolitical conflicts can also influence the supply of these metals, as wars can affect supply lines and production capabilities globally. If combatants aren’t permitting gold and platinum passage to their preferred destinations, the price of both is going to rise.

Platinum Bar vs. Gold Bar Premiums

Although the price of gold is significantly higher than the price of platinum at the moment, it is actually more cost-effective to buy gold if you are talking about the premiums that you pay.

We compared two 10 oz bars and calculated the percentage of premium assigned to each one. For gold, you can expect to pay roughly 2.2% over spot for a bar. For platinum, you’ll have to fork over an additional 3.3% in premium.

In other words, you’ll have to pay 50% more in premium when you buy platinum. This higher premium stems not only from the relative rarity of platinum, but also the increased difficulty in refining it. Platinum has a melting point more than 1000 degrees Fahrenheit higher than gold, and it requires more energy and effort to create finished products out of platinum.

Platinum vs. Gold Bar Liquidity

Liquidity is a measure of how easy it is to find buyers and sellers for a product. It can also be expressed as the difference between the price that buyer is willing to pay (bid) and the seller is willing to accept (ask).

Gold is far more liquid than platinum because of its much higher level of popularity. It is far easier to find someone willing to sell you gold, and it is also easier to find someone to buy it from you on the other end.

Platinum, on the other hand, is not always easy to trade. This low liquidity is part of the reason for its price volatility, as the effect of each successful trade is magnified due to their lower volume.

Demand for Gold and Platinum

Demand for gold and platinum ranges across many different industries and applications. Some of them are shared with each other, but others are unique to each metal. Here are the different ways each metal experiences demand.

Gold

• Jewelry – Gold remains the go-to for jewelers and their customers.
• Electronics – Gold’s conductivity and corrosion resistance makes it incredibly useful for circuitry and other electronic products.
• Aerospace – Gold’s resistance to high temperatures makes it a natural fit for engines and other parts of aerospace propulsion systems.
• Investment – There is no denying gold’s enduring appeal to investors, both individually and, as we discussed, for many central banks or large institutions.

Platinum

• Automotive – It cannot be overstated how persistent the demand for platinum is from the automotive industry, due to its necessity for catalytic converters.
• Jewelry – Platinum is widely used in jewelry and other commemorative items as an alternative to both gold and silver.
• Chemical – Platinum’s catalytic properties are also valuable for filtering out pollutants in the production of various chemicals, including those vital for usage in the petroleum industry.

Related articles:

• Platinum vs. Silver
• Platinum vs. Palladium
• Impact of USD on Price of Gold
• How the Spot Price is Set

Final Thoughts

There are reasons to buy both gold and silver. Gold’s demand and ubiquity certainly makes it appealing, but that price tag may give you pause.

Knowing that platinum may rise above gold once again could inspire the gambler in precious metals investors. However, even if it drops, there’s no question that platinum is a great way to store the value of your net worth in a tangible and beautiful way.