Is The Platinum Price Slated To Trend Upward In 2016?

Wednesday, May 11, 2016

It’s no secret that 2016, thus far, has been a positive year for precious metals. But when you use that phrase - “precious metals," most people assume you’re talking about one of two things, silver or gold. What about the platinum price, which has also seen some movement this year? Too many investors forget about platinum and, subsequently, leave gains in value out in the street.

But is platinum really tied to silver and gold’s success? And does it appear poised to have a bull market in 2016? Let’s take a look at the recent moves in platinum and its historical price against gold, and find out if platinum might be a worthwhile investment right now.

The Recent History Of Platinum: A Chart

First, we turn to PtCalc.com to get a visual idea of whether or not platinum is underperforming or overperforming its traditional ratio to gold. Frequent silver investors will recall that one of the most important numbers to understand is the ratio of gold’s price to silver. Although you can’t get all of the information you need from this one variable, it’s a great place to lay a foundation of understanding when it comes to the precious metals not named gold.

Below, you can see the gold to platinum ratio along with the average (and you may notice an interesting trend at the end):

As you can see, over the past five years, the price of gold’s ratio to the price of platinum has averaged a little bit over 1:1, which means that over a five-year trend, gold’s price tends to equal that of platinum, with a slight edge to gold. The recent spike over 2015 and 2016 shows that gold’s price has seen gains that platinum has yet to realize. The trend at the end suggests the possibility that platinum has begun a new turn towards the average line again, which means that even gold bugs might be intrigued by the possibilities of platinum in 2016.

But five years is a small sample size. What is the long-term average of gold to platinum? As it turns out, the average gets even lower on a longer timeline, with the 20-year average of gold’s price to platinum’s price at less than 0.8.

If you believe in gold ratios as an indication of which precious metals to buy, it would appear that platinum is due for a run against the price of gold.

Platinum’s Performance

Of course, no evaluation of platinum prices would be complete without looking at its performance in what it’s actually denominated in, U.S. dollars. And there we find some interesting facts. Recently, platinum hit a near 11-month high, resting comfortably above $1,000 an ounce. This morning, platinum is already up $22 an ounce, though hour-to-hour gains are a little more difficult to hold than eleven-month highs.

It appears that platinum’s arrow is trending upward, if these two major indicators, price history and gold ratio, are considered. But in coming articles, we’ll address more to understand about the platinum market and explore the possibility that platinum may again be headed above the price of gold, where over the past few decades, it has averaged a higher price.

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.