Mainstream media has led us to believe that platinum is more valuable than gold. Take the music record industry, for example. Once an album has sold 500,000 copies, it’s certified as gold. However, if the sales exceed 1,000,000, it’s certified platinum. This gives the impression that platinum is better than gold. When it comes to investing, however, it’s not as clear cut. The question of whether to buy platinum or gold as the better investment is more complicated. Let’s examine the factors that go into determining the investment value of platinum and gold to figure out which investment is better:
Rarity
Platinum is rarer than gold. This is because the amount of gold available exceeds that of platinum. The reason for this is that gold is mined more worldwide than platinum. Moreover, gold mining has been going on for thousands of years, whereas platinum mining only began in earnest a few hundred years ago. Gold also tends to be cared for and kept safe, meaning that a large portion of mined gold is still around today. As a result, there is much more gold in the world than platinum.
Cost
In general, gold tends to be less expensive than platinum most of the time. This is mainly due to mining. Platinum mining is done mostly in South Africa. By contrast, gold mining is done all over the world. This means that if something were to happen in South Africa that disrupted platinum mining, the cost would increase. However, with gold, a supply disruption in one mine would have much less of an impact on prices as there are tons of other mines to get supplies from.
Extraction difficulty is another factor in pricing. Gold mining is much easier to undertake than platinum mining. Some gold prospectors have extracted gold from a river using their bare hands and a few tools. Platinum, on the other hand, is mostly found in deep underground mines as a byproduct. Extracting this metal from hard rock is a costly process involving expensive machinery.
Demand
Even though platinum is a precious metal, it’s used most often like industrial metal. For instance, the most extensive use of platinum is in catalytic converters for cars. Furthermore, the global movement for a cleaner environment and stricter emissions standards has increased platinum demand.
There is less demand for heavy machines and vehicles powered by engines containing platinum in a poor economy. By contrast, a good economy usually means that there will be a high demand for platinum. This means that the fortunes of platinum are tied to global economic conditions.
When it comes to the demand for gold, it is much less likely to experience the chaotic swings in demand that platinum does. This is because gold is mainly used to store a person’s wealth, whether in jewelry or investment. For these reasons, the price and demand for platinum tend to fluctuate more than that of gold.
Which is the Better Investment?
Gold is well known throughout the world. Platinum, on the other hand, isn’t as recognized. For example, you can go almost anywhere, and gold is exchangeable for goods or services. The same cannot be said for platinum. Furthermore, gold is a stable investment. It is mined throughout the world, limiting supply disruptions, and it has a relatively fixed cost, and the demand is constant.
Economic fluctuations mean that there are instances when platinum is cheaper to buy than gold. If you take advantage of the economic downturn and purchase platinum, you will profit when the prices go back up. However, there is a significant drawback. You are at the mercy of the economy. Prices may stay low or drop even lower than the cost of gold. It could be years before you see an upturn.
In the end, the answer to the question of which is the better investment depends on the level of risk you want to undertake. Gold is less risky and should be the choice for most people. Platinum can be a great opportunity if you can get it at the right price, but earning a profit depends on market fluctuations, making it a more risky investment.
Photo by Nick Fewings
