How the Platinum Markets Are Moving in Relation to Gold



Concerns about platinum markets

The falling platinum prices have been a major concern for platinum mining companies in Africa. Platinum, like palladium, is used as a catalyst to reduce carbon monoxide emissions in vehicle engines. It’s also used in diesel-based generators. The platinum market has been in short supply over the last few years, and its deficit is expected to expand in 2018 as well.

The same factor that supports palladium prices is also detrimental to platinum prices. Higher demand for gasoline-powered vehicles over diesel-based vehicles caused a slump in platinum prices.

Article continues below advertisement

In 2018, platinum has followed gold and silver, and its performance has been more directly linked to its precious metal properties rather than its industrial use. When analyzing platinum markets, it’s essential to compare the metal’s performance with that of gold, the most influential of the four precious metals. On June 28 at 7:30 AM EDT, the price of gold was $1,253.70 per ounce and the price of platinum at $856.00 per ounce.

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 June 26, 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 51.

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 has dropped 6.8% year-to-date and IAU fell 3.5%, suggesting that gold outperformed platinum. 

Key mining stocks significantly affected by precious metal movements include New Gold (NGD), Newmont Mining (NEM), Sibanye Gold (SBGL), and Gold Fields (GFI), which fell 4.3%, 3.1%, 10.4%, and 3.3%, respectively, last week.


More From Market Realist