
Oselote
By Andrew Prochnow
Gold (/GC) hasn’t precisely been on fireplace in 2023, but it surely did set a recent all-time excessive this yr, and is at present up about 10% on the yr.
Curiously, considered one of gold’s closest cousins—a treasured metallic referred to as platinum (/PL)—has really declined in worth this yr. 12 months-to-date, platinum costs are down about 10%.
Very similar to gold and silver, gold and platinum share a detailed, historic buying and selling bond. Historically, the 2 metals have traded with a comparatively robust, optimistic correlation. That means they sometimes commerce in the identical route, and sometimes to an analogous diploma.
Clearly, that correlation has damaged down considerably in 2023, as the costs of those two treasured metals have diverged. Presently, platinum trades for about $975/ounce, whereas gold trades for nearer to $2,050/ounce.
Curiously, the all-time excessive in platinum is round $2,200/ounce, which is nearly similar to gold’s all-time excessive. Nonetheless, platinum at present trades about 55% under that.
Platinum set its all-time excessive of $2,200/ounce again in 2008 because of a provide deficit out there. During the last 5 years, nevertheless, platinum hasn’t traded above $1,300/ounce. Meaning platinum costs are at present buying and selling about 25% under their 5-year excessive.
Compared, gold costs have trended towards all-time highs in 2023. On Dec. 3, gold set a recent all-time excessive of about $2,150/ounce. As we speak, gold trades just under that, at $2,050/ounce.
Buying and selling the Gold/Platinum Ratio
As a result of robust historic correlation between gold and platinum costs, many traders and merchants observe the gold/platinum ratio. Extremes on this ratio usually function a sign that one of many metals is priced too excessive, or too low.
The gold/platinum ratio is similar to the gold/silver ratio, which is one other key gauge that market individuals use to trace costs within the treasured metals universe. The gold/silver ratio stories what number of ounces of silver are required to purchase a single ounce of gold.
Alongside these strains, the gold/platinum ratio stories what number of ounces of platinum are required to buy a single ounce of gold. And very like the gold/silver ratio, the gold/platinum ratio will be tracked over time, offering further context on the relative costs of every metallic.
At current, greater than two ounces of platinum are required to buy a single ounce of gold. The precise determine is 2.1 ounces ($2,050/$975 = 2.10). Wanting on the long-term relationship between these two metals, the present stage within the Gold/Platinum ratio means that gold costs are comparatively costly compared to platinum.
Over the past 10 years, the gold/platinum ratio has ranged between roughly 0.80 and a couple of.50. Meaning at one level, lower than one ounce of platinum might buy an oz. of gold. And on the different finish of the spectrum, about 2.5 ounces of platinum have been at one level required to buy a single ounce of gold.
In relative phrases, one can see how 0.80 represented a zenith within the value of platinum, whereas 2.50 represented the nadir. As we speak, gold costs have outperformed platinum, which is why the Gold/Platinum ratio has trended again towards that finish of the spectrum.
Buyers and merchants observe the gold/platinum ratio to filter for potential alternatives to pair gold and platinum towards one another. Alternatively, some market individuals may choose to buy platinum outright when costs are traditionally weak versus gold, as they’re at the moment.
At this juncture, the present stage within the gold/platinum ratio would theoretically name for a brief gold, lengthy platinum pair. A place that may produce a revenue if the gold/platinum ratio have been to pattern again to its historic common of roughly 1.65, from its present stage of two.10.
Alternatively, some market individuals may elect to attend for the gold/platinum ratio to swing even additional towards an excessive. For instance, ready till the ratio reaches 2.40 (or above) to deploy the brief gold, lengthy platinum pairs commerce.
Provide-Demand Concerns
One other necessary issue to bear in mind relating to the platinum market is the supply-demand dynamic. Final yr, miners produced 190 tons of platinum globally, whereas whole gold manufacturing was nearer to three,100 tons.
The overwhelming majority of platinum is mined in Canada, Russia and South Africa. Nonetheless, South Africa is the biggest international producer by a large margin. Historically, which means provide disruptions in South Africa can have a big effect on the worth of platinum.
That was actually the case again in 2008, when provide shortages pushed platinum costs to all time highs.
When it comes to demand, the automotive business is historically the biggest shopper of platinum, primarily as a result of it’s a key element in catalytic converters.
Catalytic converters are an integral a part of the exhaust programs in gas-powered automobiles—they assist to scale back dangerous emissions by changing pollution like carbon monoxide (CO), nitrogen oxides (NOx), and hydrocarbons into much less dangerous gasses.

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In 2023, lowered demand from the automotive business has actually weighed on the worth of platinum. That state of affairs has been pushed by slowing car gross sales, in addition to elevated curiosity in battery-electric automobiles (BEVs)—the latter of which don’t require catalytic converters.
On high of that, provides of platinum stay sturdy. All advised, which means an financial rebound in 2024 would assist push platinum costs larger, as a result of that may virtually actually result in elevated demand for vehicles.
Alternatively, if gold costs proceed to soar, platinum might additionally profit from elevated demand from the jewellery business. That’s as a result of when gold will get prohibitively costly, some jewellery producers usually shift to decrease price choices, and that may very well be the case with platinum in 2024.
Platinum is extremely valued within the jewellery business because of its magnificence, rarity and sturdiness. It’s usually used to make high-quality objects similar to rings, necklaces, and watches. Furthermore, rhodium is extracted from platinum, and rhodium is one other metallic that’s coveted by the jewellery business.
Contemplating the entire above, traders and merchants anticipating an financial rebound in 2024 might lean towards a straight lengthy platinum place. Alternatively, long-time individuals within the treasured metals market may favor a brief gold versus lengthy platinum pair. This commerce construction advantages from a “reversion to the imply” within the gold/platinum ratio.
To entry the gold and platinum markets, market individuals sometimes use futures or ETFs. Within the case of the latter, merchants are likely to gravitate towards the SPDR Gold Belief (GLD) and the Bodily Platinum Shares ETF (PPLT), which have probably the most property beneath administration, and commerce with the best day by day quantity.
Andrew Prochnow has greater than 15 years of expertise buying and selling the worldwide monetary markets, together with 10 years as an expert choices dealer. Andrew is a frequent contributor Luckbox journal.