Platinum Leaves Gold in the Dust


"The metal has outperformed bellwether gold to climb 17% so far this year. . ."

The recovery of platinum prices from multi-year lows at the height of global economic panic in 2008 means they are finally approaching pre-crisis levels and so are the metal's fundamentals.

The metal has outperformed bellwether gold to climb 17% so far this year to around $1,715/oz., versus gold's 4% rise to around $1,140/oz.

Fundamental supports for the market include new investment products and signs of recovery for a battered global car sector. At the same time, U.S. real interest rates are rising, raising the prospect of monetary tightening as a headwind for gold.

Platinum's premium over gold hit a 17-month high in April, fueled by hopes the recovery was gaining traction.

The gold/platinum ratio hit its lowest since October 2008 in early April at 0.66, a level last seen before crisis engulfed the global economy.

Analysts say while some of this rise is due to a climb in investment, the ratio movement suggests real consumer appetite is now in platinum's favor.

"The gold-platinum ratio should be a leading indicator of what is happening in the real economy," said Standard Bank analyst Walter de Wet. "Gold is largely driven by accommodative monetary policy, while platinum is a real economy variable."

The gold-platinum ratio has already inched back up to 0.67. But analysts are confident it will drop once more.

With investment currently making up a disproportionately large proportion of gold demand, any change to the low interest rate environment or to risk appetite may hurt gold. The market is also awaiting further IMF gold sales.

This, added to the stronger platinum outlook, is set to lead to a widening differential between the two. The argument is whether it will be platinum's gains or gold's losses that drives this, with the former nosing ahead in analysts' estimations.

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