What the Gold-Platinum Ratio Indicates



Platinum markets

Lower platinum prices are a major concern for platinum miners in Africa. Platinum, like palladium, is used to cut down carbon monoxide emissions and as a catalyst in vehicle engines. It is also used in diesel-based generators. The platinum market has been in short supply for the last few years, and its deficit is expected to expand to a short supply of 275,000 ounces in 2018.

In 2018, platinum has followed gold and silver, and its performance has been more linked to its precious-metal status than its industrial use. When analyzing platinum markets, it’s essential to compare the metal’s performance with that of gold, the most crucial of the four precious metals.

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Gold-platinum spread

The gold-platinum spread has been on a rollercoaster ride over the past two years. It was trading at 1.4 on May 10, indicating that it would take 1.4 ounces of platinum to buy a single ounce of gold. The spread’s RSI (relative strength index) score is 43.

The gold-platinum spread can also be analyzed through gold- and platinum-based funds such as the Physical Platinum ETF (PPLT) and the iShares Gold Trust ETF (IAU). PPLT increased 2.6% last week, and IAU increased only 0.64%, suggesting platinum outperformed gold. Key mining stocks significantly affected by precious metal movements lately include Sibanye Gold (SBGL), Gold Fields (GFI), Randgold Resources (GOLD), and Harmony Gold (HMY), which fell 17%, 1.5%, 4.9%, and 6.8%, respectively, last week.


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