Platinum Price Underperforms Gold, Silver, and Palladium

November 18, 2010

In what has been a strong year for precious metals, platinum is showing only a modest gain of 13.35% for the year to date. This is below the gains experienced for gold and silver, and far below the nearly 75% gain for palladium.

After peaking at $2,273 per ounce in March 2008, platinum dropped precipitously to a low of $763 per ounce by October of the same year. While other precious metals have reattained their 2008 high water marks and then some, platinum has lagged behind.

Gold, Silver, Platinum, and Palladium Performance (London Fix Prices)

Dec 31, 2009 Nov 18, 2010 Change Percent
Gold 1,087.50 1,350.25 262.75 24.16%
Silver 16.99 26.57 9.58 56.39%
Platinum 1,461.00 1,656.00 195.00 13.35%
Palladium 393.00 684.00 291.00 74.05%

The relative under performance of platinum compared to palladium can be explained by the supply and demand situation. While platinum is forecast to be in a surplus of 290,000 ounces for the year, palladium will be in a deficit of around 200,000 ounces. There has been more demand for palladium, which is used in catalytic converters for gas powered automobiles, than platinum, which is used in diesel devices. Palladium recently hit a nine year high above $700 per ounce.

The ratio between the price of platinum and palladium is 2.42, which is the lowest ratio is more than seven years.

Gold, Silver, Platinum, Palladium Chart (COMEX Prices)

Gold and silver prices have benefited from strong demand from investors. Global fiscal imbalances and currency tensions have brought attention to these metals' historic status as stores of value and inflation hedges. Due to platinum's predominantly industrial uses and the supply surplus noted, it has not been as significant a beneficiary.

The price difference between platinum and gold is currently $305.75. When platinum reached its peak price in March 2008, the difference had expanded to $1,289. The metals traded close to parity in mid-December 2008.

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