Monday, September 5, 2011

Platinum could be a better bet than gold

Is platinum now a better bet for investors than gold? Many seem to think so.

Gold prices have soared by 32pc this year, as investors sought a safe haven from the global debt crisis. However, some argue that gold is in a bubble fuelled more by speculation than the fundamentals of supply and demand. In contrast, platinum prices have risen by just 5pc so far this year – and supply remains very tight indeed.

Last month gold prices charged ahead of platinum prices, creating what some analysts regard as a sign that gold is overvalued.

Nick Moore, a metals analyst at RBS, is clear that platinum currently looks a better investment bet. "Platinum is now very cheap relative to gold," Mr Moore says. "Over the past 10 years platinum has averaged $420/ounce higher than gold."

Spot gold is currently at $1,883 an ounce with platinum futures at $1,876 – a $7 premium. Indeed, last month gold managed to jump to a premium of about $50 an ounce. Standard Chartered also said last week that it thought platinum was likely to outperform gold over the next few weeks after investor demand for platinum picked up "sharply."

The market fundamentals of platinum are tight. According to Platinum 2011, released by Johnson Matthey earlier this year, the platinum market in 2010 showed a "very small" surplus of just 20,000 ounces. more