A Look at the Gold-Platinum Ratio in March 2018



Used as a catalyst

Platinum and palladium are both used to lower carbon monoxide emissions and are thus used as an autocatalyst in vehicle engines. Platinum is used in diesel-based engines, while palladium is used for gasoline-based engines. However, platinum shows off its precious side and maintains a strong bond to gold and silver, unlike palladium.

Since the beginning of 2018, platinum has increased 1.6%. In this part of the 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 gold, which is the most crucial of the four precious metals.

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Short supply

As you can see in the above chart, the ratio has been on a roller coaster over the past two years. It declined to 1.4 on March 26, 2018. A ratio of 1.4 indicates that it takes 1.4 ounces of platinum to buy a single ounce of gold. The RSI level for the ratio is 75, suggesting a possible downward reversal in price.

The platinum market has been in short supply for the past few years. The deficit is expected to increase to a short supply of 275,000 ounces in 2018.

Spread reading

The comparative performance of gold and platinum can also be studied through gold- and platinum-based funds such as the ETFS Physical Platinum (PPLT) and the SPDR Gold Shares (GLD). PPLT has posted a 2.5% gain on a year-to-date basis.

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


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