Anyone Notice That Platinum Is Lower Than Gold?

As I post, gold is $1,619.30 but platinum is $1,524.00. Platinum took more of a beating because it's in part an industrial metal.

The reason why I'm noting this is because I heard a rule about gold several years ago: when platinum falls below gold, gold's a buy. Although there's no strong economic rationale behind it, this rule's worked well in the past. It worked in '08.

Do you think it'll work now?

 

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I think it depends on the timing. I just want to talk about that statement though. If gold is $1600, platinum $1500, and platinum is usually higher than gold, wouldn't platinum falling below gold make PLATINUM a buy?

Maybe I am missing the fact the this inversion is telegraphing economic troubles which will then force the price of gold up, and by the time platinum recovers both will be back down to lower levels. This very well could be.

Interesting saying, at least, and should be an interesting discussion.

Chris

 

You're right about it making platinum more of a buy. I think the person who noted it was a goldbug, and didn't quite think the implication through - or perhaps she did mention it, but I forgot. Mathematically, platinum would be a better buy. If it reverts to the normal premium, it would have to go up more than gold.

 

Well, it could be that platinum is very cheap, or gold is very expensive. High gold prices, which don't really have an industrial component, will not cause platinum to move higher. The way to make money on this is to buy platinum and short gold -- but no everyone can do this. That said, buying platinum still looks like a pretty good speculation in case the old relationship holds true.

 

Short gold at your own risk. You will need cojones of depleted uranium to do this.

 

If you short gold and go long an equal dollar amount of platinum, then it doesn't matter whether the prices rise and fall. All that matters is the spread.

 

I'm not an investment expert, which is why I won't touch shorts with a 10 foot pole. With a standard investment the most you can lose is how much money you've put into it, but with a short you are betting it will go down, and there is no ceiling to stop your losses like the floor of zero on the flip side. So shorting can incur infinite losses, and is too risky for me.

 

I did not and would not recommend going short gold as a single trade. But when you pair a short in gold with a long in platnium, you will make money if platinum outperforms gold regardless of how high or low either one goes. I wouldn't expect many people to try it and just offered it in response to the OP. Nobody should ever let a trade go against them to infinity. If you can't take a small loss, you almost certainly will take a big one.

 

Kitco bid prices are now:

Gold - 1660.90
Platinum - 1506.00


That's a .907 ratio!

Anyone know the lowest ratio previously seen? Is it even conceivable that platinum in the long term will stay below gold?

 

As far as I know this is at or near the lowest ratio in recent history. Platinum is $1,000 less than it was a few years ago, and gold has been on a tear. In a deflationary environment platinum and palladium stand more to lose since they are not monetary metals like gold which could still continue to rise as a safe haven. The PGM's look like a good buy right now, but if the economy doesn't pick up they may keep going down.

 

Who say's they aren't monetary metals? Tell that to mints around the world.

 

By this definition zinc would be a monetary metal since it goes into the penny.

 

lol
True but I think it's the cost that matters...so it's not that simple but your point is taken.

 

Also by that definition nearly every metal would be. Most metals at one time or another have been coinage, including steel, lead, aluminum, and even toxic ones.

 

Be they monetary or no, I figure a 'precious' metal that is also found in jewelry, a la sold as a notable inclusion or for the thing itself, is at least close to being monetary. Hmm, it reminds me that buying diamonds might not be a bad idea either, but this isn't the board for that thought.

 

The only government that used platinum for circulation coins was Czarist Russia. Even aluminum's been more popular than platinum for regular-issue.

 

You can ask DesertGem about this subject. He is our resident expert here on gems I believe.

I would simply say the high wire risk of buying gems versus PM is inconceivably high. The fungibility of PM is extremely important, and losing that exponentially increases investment risk. Diamonds especially, since in many ways their rarity is manufactured and have extremely high price distortions versus true rarity and demand.

 

This particular topic has been discussed at length in other threads, and there are a number of different criteria that people use to determine this that do not always agree. The way I gauge whether something is a monetary metal is by 2 things.

1) Has there ever been a monetary standard based on the metal?
2) Popular opinion based on my encounters with people which is an unreliable variable and only really has merit from the individual's (my own) perception.

This doesn't mean the PGM's can't fulfill such a role, merely that they have not held that role at some point in history so I do not view them as monetary metals. If they were I would expect platinum to still be higher than gold.

Interesting, I was unaware of this. It appears to me that whether a metal has been used to coin money or not doesn't matter nearly as much as whether that metal has been used for a 'metal standard' for backing paper currency, an important distinction in deriving what constitutes a monetary metal in my opinion. Otherwise metals like copper, aluminum, zinc, tin, nickel, and others would fit into monetary metal status which is obviously not the case. As far as I can tell only gold and silver fit that criteria.

 

Been a tough fall for all metals...but never thought I'd see plat lower than gold....freaky goings on.

 

well copper, aluminum, zinc, tin, and nickel aren't exactly "precious metals" that stuff is meassured in pounds and tons isn't really viable for commerce... (I want to buy your chicken there...how about if I pay you 10 pounds of copper? or 2 pounds of nickel? how about 50 chickens... maybe 495 pounds of copper as you get a discount buying in bulk? however I could see one accepting a 1 ounce gold coin or a couple rolls of ASE's....it's really all in what works and what doesnt... they didn't have cars to carry a ton of copper around for trading back 150+ years go or 1,000 years ago.. but if you got gold/silver then you can normally carry that in a coin bag