HardAssetsInvestor

Written by Adrian Ash  |

July 30, 2012

Ash: Store-Of-Value Gold Has Never Been So Expensive Against Platinum

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‘Little silver’ suffers against the yellow metal from lack of investment demand and safe-haven status.

[This article previously appeared on BullionVault.com and is republished here with permission.]

Both platinum and gold are useful metals. But where gold's use is ultimately social – being a thing of beauty, symbol of power, store of value and a means of exchange since the earliest civilizations – platinum is primarily an industrial metal. That isn't helping platinum versus the gold price one bit right now.

Platinum – from platina, meaning "little silver" in modern Latin via Spanish – was only identified as a precious metal in the mid-18th century. So it lacks gold's long history of human use.

In our modern age of global commodity markets, unbacked fiat currency, and fast-growing car ownership, little silver has always traded at a steep premium to gold – a 46 percent premium per ounce, on average.

Thus, the problem amid our economic depression today. "Platinum lacks safe-haven status and has limited investment demand," explains Morgan Stanley's commodities team. So gold has never before been this expensive in comparison.Yes, jewelry accounted last year for nearly one-third of global platinum demand. But little of that was store-of-value demand such as gold enjoys. Investment demand remains only a sliver of world off-take.

Platinum demand from the glass, medical, chemical and petroleum industries comes on top of a further 38 percent of demand in 2011 coming from the auto sector, most notably in Europe, because earlier tax incentives now mean one in three vehicles on the continent's roads runs on diesel, thus needing a platinum-only catalyst instead of the platinum-rhodium or palladium mix in gasoline engines.

Platinum demand is directly exposed to the eurozone crisis. So exposed, in fact, that London bullion prices are now nearing mine-production costs around $1400 per ounce. Cue the bullish outlook: