Why is platinum considered an alternative to gold?

Platinum is becoming increasingly attractive as an investment for investors, which has led to growing popularity of this precious metal in recent years. The price increases also contribute to this.

The fact that platinum is rarer than gold, combined with growing demand, drives the price increases. Still, platinum is currently cheaper than gold, as has been the case in the past. This is due to the fact that gold is much more well-known and popular as an investment. Therefore, now is a good time to invest in platinum.

The advantages and disadvantages of investing in platinum

There are both advantages and disadvantages to investing in platinum. The precious metal is relatively rare, which makes it more valuable and is expected to remain so in the near future. This high value is further supported by its versatile industrial applications. It is used in various automotive components, but increasingly also in the production of jewelry.

There are also a few drawbacks to investing in platinum. This metal is more price-volatile than, for example, gold, which means prices tend to fluctuate more. Additionally, the fact that platinum and palladium are used so heavily in the automotive industry is also a disadvantage.

When demand from the industry decreases, the value also drops. In that case, investing in platinum and palladium becomes less attractive.

How does platinum perform on the market compared to gold?

There have been times when platinum was even more valuable than gold. At the start of the economic crisis, the platinum price peaked at $2,300 per troy ounce. At that time, gold was worth $1,000 per troy ounce.

Throughout the economic crisis, the price of platinum remained higher than that of gold, but after the crisis the demand for platinum fell, as the automotive industry produced less. This caused a significant drop in the platinum price. The gold price benefited from this, with a stable value increase. Gold rose to over $2,000 per troy ounce, while platinum fluctuated between $800 and $1,200.

These figures underline that gold is seen as more stable. This is mainly because gold is considered more value-retaining during economic crises. The reason for this is that platinum is more dependent on industrial demand. However, when the platinum price does rise, these increases tend to be sharp.

Key applications of platinum that affect its value

As mentioned, platinum is used in various industries, such as the automotive sector. Due to stricter environmental regulations in this sector, the price of platinum is steadily rising.

However, this precious metal is also used in an emerging industry: hydrogen technology. With the help of platinum and hydrogen, energy is generated.

Platinum is also increasingly used in the creation of jewelry. This affects its price, partly because platinum is harder to process than gold and silver. This is due to platinum’s very high melting point of 1,768 degrees Celsius. It is also harder than other precious metals. As a result, many different tools and equipment are needed to process platinum, which further drives up the price.

Buying and investing in platinum

There are various reasons to invest in platinum or to purchase this metal for other purposes. The growing interest of the automotive industry in hydrogen technology is the main reason for the rising value of this precious metal.

In the jewelry market, there is increasing demand for more sustainable luxury products, which also creates opportunities for the platinum market, as platinum is more durable than any other precious metal. This is mainly due to the long lifespan of platinum.

Because platinum is quite rare, it can sometimes be difficult to obtain. As a result, it may be harder to buy or sell quickly. Furthermore, platinum is mostly produced in countries that are prone to geopolitical issues, such as South Africa and Russia.

Due to this political instability, platinum prices can fluctuate significantly, which makes investing in platinum less attractive for some investors.

So there are quite a few considerations when it comes to investing in platinum. Fortunately, our specialists are happy to help you with any questions. Do you have questions? Then contact The Silver Mountain for personal advice.

Disclaimer: The Silver Mountain does not provide investment advice and this article should not be considered as such. Past performance is no guarantee of future results.