The White Metal Platinum Still Trailing the Yellow Metal Gold

July 08 05:43 2017

DENVER, COLORADO – 8 Jul, 2017 – Platinum has been called “white gold” or “rich man’s gold”. However, for about six years, this white super metal has been taking a back seat to its yellow colored cousin – Gold. 

From 1988 to 2011, platinum maintained an average price premium to gold of more than $180 per ounce. However, after 2011, in a reversal of fortune, platinum has generally been lagging behind gold in price. As of July 6, 2017, gold closed at $1,225.15 per ounce versus platinum’s closing at $ 912.50 per ounce. Thus, gold is now trading at a substantial $ 312.65 per ounce premium to platinum. This represents a percentage premium of 34.26%, far above historical norms. 

Theories abound as to why this recent aberration in the platinum/gold ratio has taken place. Some analysts suggest that the Great Recession and financial crisis of 2008-2010, and the subsequent economic malaise that followed, dislocated the platinum/gold ratio because platinum is not typically perceived as a “monetary equivalent” like gold. Gold for example has tremendous liquidity on many trading exchanges and platforms, and is widely perceived as an alternative “store of value” in competition with paper currencies such as the U.S. dollar, the Euro, Japanese Yen, U.K. Pound, Chinese Yuan, and Indian Rupee. In addition, during times of economic turmoil and uncertainty, gold has often been accumulated by global investors and money center banks to provide a hedge or stabilizer against other asset categories such as stocks, bonds, and real estate. 

Other commentators have suggested the forecast reduction in the quantity of platinum used in automobile catalytic converters has depressed the white precious metal. In addition, insomuch as platinum has been more widely used in industrial applications because of its remarkable resistance to corrosion and high electrical conductivity (uses include catalytic converters, electrodes, electrical contacts, dentistry tools, laboratory equipment, and fine jewelry); it would seem logical that platinum’s price would be more pressured than gold, during a deep recessionary period. 

So does this create risk or opportunity in owning platinum compared to gold? Well, the answer may be both. On a short to intermediate term basis (less than 6 months), the stronger technical behavior of gold seems to favor the yellow metal. On the other hand, on a longer term basis, this author believes platinum may be poised to outperform gold in a reversion back to its historic supremacy. And, If global economies continue to pick up their growth pace, and the U.S. Congress successfully passes a more simplified tax code with lower top end rates and ower corporate tax rates, along with fiscal stimulus such as a national infrastructure bill, look for platinum to begin outpacing the yellow metal. 

Platinum can be accumulated or traded in various forms including physical bars, ingots, collectible coins, and exchange traded funds. In addition, platinum commodity contracts are widely traded, for investors with high risk profiles. As a registered investment advisory firm, we prefer to use exchange traded funds because of their daily market liquidity, and the ability to enter and execute price activated limit orders. 

Certainly, precious metals have an appropriate place in many investors’ portfolios, as some long term studies have shown precious metal allocations in the range of 5% to 15% in an overall portfolio can provide higher risk adjusted returns relative to stock or bond portfolios absent of precious metals. However, its up to you and your investment advisor to make a final determination as to which precious metal to invest in, and what percentage allocation is most appropriate for your age, and risk tolerance. 

Finally, all investors should be aware that despite their rarity, both platinum and gold can be highly volatile with no guarantee of principal. Outside forces such as geo-political upheaval, and central bank interest rate intervention, both in rising and declining interest rate environments, can cause substantial gyrations in precious metals. 

If you are looking for more information or guidance in learning how platinum or gold may be integrated into your overall investment plan, please contact John Blake-Zuniga at Vanguard Capital Wealth Advisors to assist you. He can be reached at *(949) 474-0490* or by email at: johnblake@vcapwa.com

Vanguard Capital Wealth Advisors is an SEC registered investment advisory firm based in Denver, Colorado. The firm specializes in assisting high net worth individuals and families with professional money management and portfolio asset allocation needs. Vanguard Capital Wealth Advisors is not affiliated with Vanguard Group, Inc. 

Media Contact
Company Name: Vanguard Capital Wealth Advisors
Contact Person: JOHN BLAKE-ZUNIGA
Email: johnblake@vcapwa.com
Phone: (949) 474-0490
Country: United States
Website: VCAPWA.COM

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