Gold vs Platinum - How Do These Precious Metals Compare in Value and Investment Potential

Understanding the Value of Gold vs Platinum

When it comes to precious metals, gold and platinum are two of the most valuable and coveted. Both have unique properties that make them ideal for jewelry, investments, and industrial applications. However, gold and platinum vary greatly in rarity, density, price per ounce, and other factors that contribute to their overall value.

Scarcity and Availability

One of the main drivers of any commodity's price is its availability and scarcity. Gold has been mined for thousands of years, with current estimates putting total worldwide gold production at around 190,000 metric tons. However, it's getting harder to find new sources of gold as existing reserves are tapped out.

In comparison, total global production of platinum is far less - around 10,000 times less common than gold. Annual platinum production globally totals around 190 metric tons, compared to 3,200 metric tons of gold. This scarcity makes platinum much more valuable per ounce compared to more abundant precious metals.

Pricing Differences

As of December 2022, gold was trading at around $1,800 USD per ounce, while platinum traded around $1,020 per ounce. These prices fluctuate daily, but platinum has historically traded around 1.2 times the price of gold. However, platinum prices can be more volatile since the market is far smaller.

At times platinum has exceeded gold, especially during periods of high industrial demand. But in recent decades, gold has consistently been more valuable per ounce. Generally, most investors and financial experts consider gold to be a superior long-term store of value over platinum.

Density and Weight

When comparing physical precious metals, it's essential to consider density. Gold has a density of around 19.3 g/ml, while platinum is significantly denser at 21.4 g/ml - making it one of, if not the most dense precious metal.

This means a gold bar and a platinum bar of the same volume would have vastly different weights. For investors buying precious metals in physical form, platinum offers more value per space occupied compared to bulkier gold - an important consideration for storage and transportation.

Jewelry Usage and Value

In jewelry, both gold and platinum are prized for their attractive sheen and resistance to tarnishing. However, they serve distinct roles based on their specific attributes.

Soft and malleable gold is the ideal metal for crafting elaborate adornments like rings and bracelets. Platinum jewelry tends to feature simpler, elegant styles since the ultra-dense metal is difficult to work and shape. This also makes platinum pieces much more labor-intensive and expensive to produce.

From a resale standpoint, gold dominates the jewelry secondary market. Classic gold pieces by well-known designers and jewelers generally retain or even gain in investment value over decades. Platinum jewelry typically sells at the value of the raw precious metal weight instead.

Industrial Usage

Both gold and platinum play essential roles in high-tech industrial applications, thanks to their unmatched stability and conductivity. Gold wiring and contacts are vital for electronics, while platinum catalyzes reactions for petroleum refining, fuel cells, dental implants, and automotive sensors.

Platinum's rarity and unparalleled corrosion resistance at high temperatures make its industrial demand - and pricing - subject to fluctuations based on usage volumes. This varying level of demand contributes to platinum's price volatility compared to the more stable gold.

Investing and Hedging

In uncertain financial climates, gold reigns supreme as a "safe haven" asset and inflation hedge. Platinum occasionally trades higher but has never matched gold's history as a reliable long-term store of value. Many investment advisers recommend portfolio allocations between 5% to 10% in gold.

However, adding some platinum can provide diversification along with price upside potential if industrial activity expands. Since gold and platinum prices often trade independently, they can offset risk during times of economic turbulence.

Key Takeaways

• Platinum costs more per ounce but gold reaches higher overall market values.
• Gold supplies are 5,000-10,000 times more abundant compared to scarce platinum reserves.
• Platinum is denser, with higher purity jewelry that demands skilled craftsmanship.
• Gold dominates jewelry designs and retains high resale value over time.
• Both metals hedge against risk but gold is considered a superior long-term store of value.

FAQs

Why is platinum currently cheaper per ounce than gold?

Although platinum has historically traded higher than gold, its prices tend to be more volatile. Platinum prices depend heavily on industrial demand, while gold prices are driven by investment demand and have steadier long-term value as a hedge against risk and inflation.

Which metal is better for jewelry?

Gold is the preferred metal for most jewelry designs because it is malleable and beautiful. Platinum jewelry costs more to craft due to the metal's ultra-high density and is usually reserved for simpler, elegant pieces. Gold dominates the high-value collectible jewelry market.

Do gold and platinum retain their luster forever?

Yes, gold and platinum are among the few precious metals that do not oxidize or corrode even after centuries. This makes them ideal for jewelry that retains its shine and for demanding industrial applications where resistance to tarnish is critical over decades of use.

What causes price fluctuations in platinum?

As an extremely rare metal with outstanding industrial properties, platinum prices vary widely based on demand pressures. Expansion of key usage areas like automotive sensors, jewelry, and petroleum refining impact both supply and demand for scarce platinum reserves.

Is investing in platinum advisable for my portfolio?

Investment advisers typically recommend portfolio allocations ranging from 5-10% in either gold or a mix of gold and platinum. Gold should form the bulk of precious metal investments, while platinum provides some diversification and growth potential during economic expansions.