If you’ve followed the live spot prices of gold and platinum, you know that gold is typically priced higher than platinum. Platinum is rarer than gold. Many estimate that platinum is 30 times rarer than gold.
There have been about 208,000 metric tons of gold and only 6,000 metric tons of platinum mined in human history.
While the demand for platinum continues to grow, the use of gold in finance and investment has outpaced the industrial demand for platinum. Since its primary use is in currency and finance, the demand for gold has only grown.
The Gold-to-Platinum Ratio
Like the gold-to-silver ratio, the gold-to-platinum ratio can be a useful metric for investors who want to assess the price of a given metal. The ratio conveys the number of platinum ounces it would require to purchase an ounce of gold.
It is determined by dividing the spot price of gold by the spot price of platinum. Some investors use this ratio to assess whether a metal is over or undervalued. When the ratio is low, an investor may decide that represents a good time to purchase platinum.
The gold-to-platinum ratio has been around 65:1 since the 1970s. While it has fluctuated, the gold-to-platinum ratio over the last 20 years has averaged 60:1, meaning that demand for platinum has grown, but not enough to overtake demand for gold.
Where is Platinum Mined?
South Africa produced 140 metric tons of platinum in 2022, Russia produced 20 tons, while Canada and the United States produced a combined six metric tons of platinum in 2022. Zimbabwe also mines and produces platinum.
As a result of the limited number of locations platinum is mined, geopolitical events can have a sizeable impact on the price of platinum. For instance, the 2008 Zimbabwe land reforms resulted in a decline of platinum production and caused a 25% spike in the price of platinum. in 2014, five months of minng strikes in South Africa resulted in a 10% rise in the platinum price.
Demand for Platinum
Demand for platinum has grown over the years as it’s industrial and automotive uses have grown. Platinum has long been used in the automotive industry, and the advent of electric vehicles resulted in greater demand. In the automotive field, platinum is used for spark plugs and catalytic converters, but it is also used in the glass industry.
Platinum jewelry is popular for its non-tarnishing and hypoallergenic properties.
Platinum is used in a variety of essential medical devices like stents, implantable defibrillators, and pacemakers. Its medical application is not limited to devices and platinum is also used in cancer fighting medicines.
Demand for Gold
The demand for gold is driven by its use as a financial instrument. While platinum and gold prices often move together, the gold price has historically been higher and more stable than the platinum spot price.
How is the Platinum Price Set?
The spot prices of metals like silver and gold are influenced by the Chicago Mercantile Exchange (COMEX). Conversely, the price of platinum is more greatly influenced by the London Platinum and Palladium Market (LPPM), and New York Mercantile Exchange (NYMEX).
The NYMEX, which itself is a part of the COMEX, offers platinum futures contracts. However, the overall liquidity and volume of platinum futures are lower than the volume and liquidity of gold and silver futures.
The LPPM is instrumental in setting the live spot price of platinum through the Platinum Fix, which is used around the world to help determine the platinum price.
The price of platinum is more volatile than that of silver or gold and is subject to industrial demand and changing conditions in the global marketplace.