Platinum - The Next Metal Set to Rally

Over recent weeks we’ve discussed the various fundamental reasons for the strong performance of firstly gold, then silver. After being outperformed by gold, silver has played catch-up and realigned in line with the traditional gold-silver ratio. In early March 2016, the ratio moved to highs of over 83:1 (the highest in 21 years), but has since declined towards its long-term average level of 55:1, as it currently trades around 68:1. The interesting extension out of all of this is to try and interpret what might happen with platinum as a potential investment option. Does it hold appeal as a precious metal that is yet to be appropriately valued in the context of long-term assumptions? Over recent decades the ratio has been below 0.8:1, but at the moment it's around 1.2:1. Based on previous history, this suggests the potential for a sizeable platinum price improvement relative to gold. Another way of looking at it is that over the past four decades platinum has traded at an average $200 premium to gold, however gold is now at a $345 premium to platinum.

Gavin Wendt
Founding Director

Gavin has been a senior resources analyst following the mining and energy sectors for the past 25 years, working with Intersuisse and Fat Prophets. He is also the Executive Director, Mining & Metals with Independent Investment Research (IIR).

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