Why Platinum Is the Best-Performing Precious Metal in 2018



Short supply

Since the beginning of 2018, platinum has been the top performer among the four precious metals. Platinum has surged a whopping 8.7% on a year-to-date basis. However, gold, silver, and palladium have risen only 3.5%, 1.9%, and 1.3%, respectively.

In this part of our series, we’ll focus on the gold-platinum spread, which analyzes the comparative price performance between these two metals. When analyzing platinum markets, it’s essential to compare the metal’s performance with that of gold, which is the most dominant of the four precious metals.

As seen in the chart above, this ratio has been on a rollercoaster over the past two years. The ratio has declined recently and stood at ~1.3 on January 26. A ratio of ~1.3 indicates that it takes about 1.3 ounces of platinum to buy a single ounce of gold. The RSI level for the ratio was 40.7.

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The platinum market has been in short supply for the past few years. The deficit is expected to deepen to a short supply of 275,000 ounces in 2018. The growth sentiment in the global markets may have given a boost to this metal, which is also used a catalyst for pollution control in gasoline-based cars.

Spread reading

The comparative performance of gold and platinum can also be studied via gold- and platinum-based funds like the Physical Platinum Shares ETF (PPLT) and the SPDR Gold Shares ETF (GLD). PPLT has posted a 9.1% gain on a year-to-date basis.

The key mining stocks that have been significantly impacted by the movements in precious metals include Eldorado Gold (EGO), AngloGold Ashanti (AU), Gold Fields (GFI), and Sibanye Gold (SBGL).


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