Golden Ratio? Platinum More Promising


"Platinum prices have plenty of scope to build on this year's 15% rise."

Prices of platinum have plenty of scope to build on the 15% rise already seen this year, based on their historic relationship with silver.

Palladium, whose prices have surged 80% this year, is also a hot favorite, based on an analysis of its ratio with silver.

The palladium-silver ratio, a measure of how many ounces of silver can be bought with one ounce of palladium, stood at just 26, half of an average of 52 since 2000.

The platinum-silver ratio recovered a little to 59 from a nearly 13-year low of 57 hit earlier this week, but way below the 11-year average of 110.

By contrast the gold-silver ratio at 48 is down by only a quarter from the 11-year average of 62.

While the gold-silver ratio dropped below the average just three months ago, the platinum-silver ratio has stayed below the average for more than two years, suggesting a period of catch-up could be due.

"Platinum seems to be by far the poor cousin. If you look to pick up a metal, you will pick platinum as the cheaper alternative. Sell silver. . .and buy platinum," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.

Platinum has been the worst performer of the precious metals complex so far this year, scoring a 15% gain compared with 27% in gold and 72% in silver.

The lackluster performance stemmed from its exposure to the European market, heavily reliant on diesel engines, which had yet to pull out from the financial crisis, analysts said.

Tightness in platinum group metals is expected to persist into 2011, said leading metals refiner Johnson Matthey in its Platinum 2010 Interim Review last month.

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