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Why Is Platinum Cheaper Than Gold?

Platinum Prices

Anyone who has ever been to a jewelry store will have come into contact with gold. It is arguably the most popular of all the precious metals, and for good reason. The history between humans and gold goes back thousands of years.

Another precious metal that people are not as familiar with, but which they may encounter when shopping for jewelry, is platinum. The history of platinum is not as long as that of gold, but it has become an alternative choice if one wants to own something made of precious metals. For instance, a ring may come in two versions: one made out of gold and the other out of platinum.

People may ask which of these two options, gold, and platinum, is the choice. To make an informed decision it may help to know some of the obvious differences between gold and platinum.

 

Some Differences Between Platinum and Gold

Obviously, gold and platinum differ in color, but they also differ in density and weight. If you’ve ever compared, for instance, a one-troy-ounce coin made of platinum and another made of gold, then you may have noticed that the platinum coin is somewhat smaller in size. They both weigh one troy ounce, but the gold coin is larger because platinum is denser.

Platinum is also much harder than gold. While 24-karat gold, or gold with a fineness of three nines, is quite soft and will bend, pure platinum is tough enough to withstand the wear and tear of daily use. To make gold hard enough to work, it needs to be reduced in purity by combining it with at least one other metal. That’s why you have 22-karat gold, 18-karat, and so on. White gold, for instance, is gold combined with other metals to alter both its look and toughness.

 

Misconceptions About Platinum in Relation to Gold

A common misconception that some people have is that platinum is more precious than gold and therefore more valuable. This misconception is often reinforced by mainstream media. Take for instance credit cards. A platinum credit card usually has a higher limit than a gold card to signify it is of higher status. This reinforces the impression among the general public that platinum is more valuable than gold.

Another example can be found in the music record industry. In the U.S., a music album is certified gold after it has sold 500,000 copies. If the number exceeds 1,000,000, it is certified platinum. Again, this creates the impression that platinum is superior to gold and therefore better than gold.

Nevertheless, the truth as to which of the two, platinum or gold, is more precious is not as straightforward as some people think.

 

A close up shot of a piece of platinum.

Platinum has long been considered a higher symbol of value and quality, primarily because it's rare and more difficult to mine.

 

Platinum is Less Rare than Gold Underground, but Gold is Less Rare Above Ground

A misconception surrounding platinum is that it is much rarer than gold. It is true that the amount of gold above ground far exceeds that of platinum. But this is because the amount of gold that is mined worldwide far exceeds that of platinum. Furthermore, the mining of gold dates back all the way to antiquity thousands of years ago.

On the other hand, platinum mining only started in earnest a few hundred years ago. Being a precious metal, gold is usually stored and kept safe by its owner. What this means is that most, if not all, of the gold that has ever been mined, is still present with us today. The combination of higher gold production and the fact that gold mining has taken place for much longer results in less platinum than gold in the world above ground.

If you take into account the platinum that is present underground in the earth’s crust, the picture becomes much more complicated. In fact, data from the U.S. Geological Survey (USGS) indicates that platinum is actually more common in the earth’s crust.

 

Platinum is Usually (But Not Always) More Expensive than Gold

A big reason platinum group metals are thought by many to be more valuable than gold is that the latter is, more often than not, priced lower. Prices for gold and platinum tend to track each other quite closely, but, generally speaking, gold tends to be less expensive than the white metal platinum most of the time. Combined higher prices with the perception that platinum is much rarer than gold and you get the impression that platinum is worth more than gold with spot prices.

At the same time, it is also true that there are times when gold is more expensive than platinum. Anyone who keeps track of gold and platinum prices on Wall Street in New York at current levels or record highs, and has done so long enough, should have noticed this. So how does one explain the pricing of gold and platinum? To better understand how prices for gold and platinum are determined, it is important to look at supply and demand.

 

Supply and Demand Determine How Much You Pay for Platinum and Gold

Supplies of gold far exceed that of platinum, at least above ground. On top of that, platinum mining is highly concentrated in one country. South Africa accounts for roughly three-quarters of the total production of platinum. It’s not hard to imagine that if something negative was to occur in South Africa, a labor strike, for instance, platinum prices will rise as there is not much of an alternative.

In contrast, gold mining occurs pretty much in every corner of the planet. A supply disruption somewhere will have much less of an impact on prices. The mining of gold is also much easier and less costly than platinum on average. A good portion of it is found on the surface, for example along a river. Single men can set out as gold prospectors and try their luck with only their bare hands and a few tools. This has been going on for thousands of years and it still happens to this day.

On the other hand, platinum is usually found in deep underground mines as a byproduct. Platinum mining often requires difficult extraction from hard rock. This is a costly process, which is only affordable to big companies with expensive machinery.

 

Demand for Platinum is Much Less Stable than Gold

Although platinum is a precious metal, its end use is often like that of industrial metals such as copper or aluminum. The biggest use of platinum is in the automobile industry in diesel cars, in catalytic converters by companies such as Volkswagen, and other industrial applications. Investment and jewelry use is of secondary importance in the price of platinum. The global move towards a cleaner environment and stricter emission standards increased the industrial demand for platinum.

A poor economy means that there is less demand for heavy machinery, vehicles, trucks and so on that are powered by engines containing platinum. A good economy generally means that platinum demand will be on the rise. So the fortunes of platinum are very much tied to global economic growth, whether they are good or bad next year.

Gold is primarily used as a way to store a person’s wealth or savings, whether it is in the form of investment, jewelry, and so on. Gold is much less likely to experience the wild swings in demand that platinum experiences.

With both its supply and demand vulnerable to extreme fluctuations, it is not surprising that platinum can sometimes be cheaper than gold even if the reverse is true most of the time.

 

So Which is the Better Pick? Gold or Platinum?

Gold is arguably the safer option as it’s well known all throughout the world. Platinum is not as familiar to everyone on the planet. Platinum does not have the same status that gold has in the culture and history of people around the world. You can go anywhere on the planet and people will recognize gold and offer something for it in return.

You are more likely to have a harder time doing that with platinum. Some people might mistake it for silver, which is worth much less than either gold or platinum. The tendency of platinum to be more expensive than gold and at times to be cheaper is an issue. If preservation or savings and interest rates are the primary objectives, gold is a better fit than platinum.

 

Platinum is Worth Extra Consideration When it's Cheaper than Gold

However, when platinum is cheaper than gold, there is an opportunity to find a bargain. Suppose you were to buy platinum when it’s less expensive than gold. If prices go back above that of gold, you will wind up with a profit from such a move. The drawback is that you may regret getting platinum if prices continue to stay below that of gold or drop even more as prices can fluctuate greatly over the years.

Both gold and platinum are noble metals in that they are highly resistant to corrosion. Do remember that the same may not be true of the metal used in conjunction with gold to stiffen it. This is why gold jewelry can experience discolorations or some other imperfection due to the presence of another metal that does not react with the air. Platinum, on the other hand, is very durable and can easily withstand the grind of daily use without the addition of other metals.

In the end, the answer to the questions to which is better is that it all depends. It’s a personal choice that can vary from person to person. Both platinum and gold have their pros and cons and every person has to decide for themselves what it is that they value more.

Gold is less risky and should probably be considered the first option for most people. With platinum, you are more likely to find a good bargain, but you’re also more likely to risk experiencing buyer’s remorse. You decide.

 

Platinum Could Be the Best Precious Metal to Buy Today

In the last century or so of time running, platinum bullion prices were almost always higher than gold prices. That fact remained true while the fully fiat US dollar buckled in value and credibility during the then later 1970s and early 1980 major four precious metal price highs occurring within months of one another. If that episode was a crisis in confidence in fiscal and monetary matters, we expect something similar but yet larger in size and scale coming up later in our lifetimes too.

While gold bullion’s main value proposition is that it is a superior bedrock monetary metal increasing again being bought by governments around the world. A multi-hundred trillion fiat currency denominated case remains ongoing for higher platinum prices to come, especially at these current historically low comparative valuations.

With just a quick look at the major 4 precious metals fully fiat US dollar price action below, the two precious metals that technically stand out as the best long term value considering all factors remain silver and platinum bullion based on the current price action. When looking at the long term fiat US dollar price for all four major precious metals, it is obvious that a consistent record price-setting palladium broke out a near 20-year price bowl only a few years back.

Gold appears to be climbing its bowl-shaped wall of worry spurred on by this record debt level everything but commodities monetary madness bubble. Both long-term platinum prices and silver appear to be turning up too and both will likely chase gold higher this decade and even into the next.

 

Platinum Bullion: Best Long Term Value Buy Today?

We fully believe there will again come a precious metals mania phase in which all four of these major precious metals are hitting all-time nominal record price highs measured in fiat US dollars, the still-dominant fiat reserve currency of the globe today, and central banks.

Physical precious metals such as platinum are extremely finite in supply compared to consistently purchasing power losing fiat currencies. Over a long duration of time, platinum bullion tends to gain purchasing power versus rapidly expanding fiat currency supplies in overall value and purchasing power. Owning physical palladium bullion as an investment and store of wealth is a relatively new phenomenon when compared to the history of silver or gold bullion usage.

The commodity bull market peak in the spring of 2008, platinum has lost over 50% of its value in fiat US dollars. Platinum basically peaked in early 2008, then valued 2Xs that of near $1,000 oz gold, whereas now the situation has almost flipped entirely. The current value of platinum vs gold to begin the 2020s has not been this low in over 100 years of time.

 

A candle stick chart of stock market trading.

Platinum has traditionally outperformed gold, but its prohibitive pricing made it difficult to invest in.

 

Platinum vs Gold Price Over 100 Year Extreme

How long can this historic divergence last? When will platinum reassert climbing valuations versus the price of gold and other asset classes? This historically extreme platinum vs gold ratio is just one major reason that platinum, akin to silver bullion today, are the two best long term precious metal values to consider owning outright in bullion coins and bars.

Platinum bullion is an umbrella term that refers to two types of investment-grade physical platinum products - platinum bars and platinum coins. The common characteristic between both platinum bullion bars and platinum bullion coins is that they are typically stuck with a guaranteed purity of 99.95% platinum.

Adding platinum is now very easy. One can easily hedge against systematic counterparty risks by owning platinum bullion outright in hand, fully outside the financial system. Platinum bullion products also offer superior liquidity, as platinum bullion can be bought and sold easily, with a value derived from the inherent value and utility of the platinum product as well as the prevailing spot market price for platinum. Both platinum bullion bid and ask prices are constantly adjusted to include manufacturing costs and supplier profit margins.

Platinum bullion buying and selling is a long term trade with a time horizon of perhaps only a few years to many decades potentially and according to ETFs. The recent historically low platinum price is again currently heavily discounted to gold. This fact has supported the demand for platinum bullion products in recent years. In some jurisdictions, for example, within the USA, platinum bullion can be directly bought and owned as an asset as a tax-deferred Bullion IRA retirement investment vehicle, thanks to President Biden.

 

Conclusion

During the Second World War, non-military use of physical platinum supplies was banned in the United States given that platinum is a military strategic metal and used in airplane engines and weapons manufacturing. Platinum still remains one of 35 critical minerals explicitly cited by the US government which publicly deems the element platinum as being crucial to the US and global economy today.

About 1/5th of every manufactured product we humans use right now, either contains platinum or requires platinum in its manufacturing due to industrial uses. Platinum is a critical catalyst for chemical reactions like crude oil cracking. Often platinum is used in catalytic converters in petrochemical powered vehicles, and also for converting methyl alcohol into formaldehyde. The element platinum can absorb considerable volumes of hydrogen and will likely begin replacing considerably higher priced palladium in various manufacturing and catalytic converter applications to come.

The platinum melt point is very high at 1,768 celsius. In fact, platinum’s high melting point caused Spanish new world silver and gold-seeking explorers to regard it as a mere nuisance in their quest. Platinum was then often used in gold coin counterfeits from the 18th and 19th Centuries AD. It was not until the early 20th Century that we fully began understanding and discovering the metallic and industrial utility of platinum and thus its ongoing price and value climbed yet it remains very rare still.

The precious metal platinum is rare in the above-ground supply. Certainly more rare versus silver and even gold monetary precious metals. All the platinum ever produced would only cover your ankles in one Olympic sized swimming pool. All the physical gold ever produced (193,000 tons) would fill over three Olympic sized swimming pools.

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