Each year, thousands of people decide that they would like to invest in precious metals. Here, many of them come across gold and platinum as viable investments, but end up asking themselves: gold vs platinum? Which is the better investment?
In recent weeks, we have looked at whether or not you should invest in gold and platinum.
However, for investors, both gold and platinum appear to on a par with one another. This got me thinking: which precious metal is the superior metal (as an investment)?
Practicality
Unlike silver, both platinum and gold have relatively high prices per gram, kilogram and ounce. This means that you are likely going to need to have quite a large amount of money, before you actually invest in either metal!
This both makes platinum and gold very practical, but also rather impractical at the same time. It really depends on your personal situation and perspective.
If you needed to liquidate part of your precious metals portfolio, say $100 worth, you may have to sell much more than $100 to cover it.
For platinum, it currently sells for about $35 per gram. This means you may have to sell a 5g bar just to cover it, as you may not have 1 or 2g platinum bars in your portfolio.
For gold, it currently retails about $60 per gram, meaning you may need to sell 2g, worth $120, just to pay a $100 bill. The extra $20 for the gold, or $50 for the platinum, may then sit idle, until you can invest in platinum/gold more!
By the same token, if you need to liquidate millions of dollars quickly, both gold and platinum are quite easy ways to do so. A 100g bar of gold or platinum could quite easily cover your entire month’s living expenses.
Types
When it comes to investing in either gold or platinum, most people tend to picture themselves buying gold or platinum bars (just like they do in the movies!) But this isn’t the only form gold and platinum come in…
In the movies, criminals tend to use gold bars, and to a lesser extent, platinum bars, as a form of untraceable payment. They can exchange some guns or drugs or whatever, for some gold or platinum bars.
Due in part to this, buying bars (sometimes known as bullion bars) are by far the most common form people buy gold and platinum in.
If you are familiar with coin collecting, you may also be familiar with the concept of gold and platinum coins. For centuries, gold was used for high-value coins, usually consisting of multiple months/years worth of wages for your average person.
Recent years have also seen bullion refiners and mints create platinum coins. Whilst on paper, these coins have monetary value, no one really uses these as currency, as they are often more expensive to buy, than what their face value is.
Whilst many people do choose to invest in gold and/or platinum through coins, they often buy them as proof coins. These are coins specifically designed to be collected by coin collectors.
Uses
On top of coming in the aforementioned forms, both platinum and gold have a number of different uses.
Commercially speaking, gold is widely used in the medical world. By far the most common use of gold is to reduce swelling around joints. Due to gold’s chemical properties, it can reduce swelling and help arthritis patients.
By the same token, platinum can also be used in industry too. Most often, platinum is used in catalytic converters. These are present in almost every car manufactured after 1993, in order to reduce the amount of harmful emissions in the atmosphere.
However, as investors, whilst we may use both gold and platinum on a daily basis anyway, these uses are not things we tend to care about.
Both gold and platinum have one major, non-commercial use. Chances are, there’s some around your hand or neck right now! That’s jewelry. Due mostly to their high prices and opulence, jewelers choose to use gold and/or platinum in their designs.
As a general rule, most investors tend to shy away from investing in jewelry due to a mixture of low returns and high complexity. Regardless, for some investors, gold/platinum jewelry is seen as a great way to invest their money!
Generally speaking, platinum jewelry is more expensive than its gold counterparts. Often, these pieces of jewelry have precious gems such as diamonds, emeralds, sapphires or rubies set into them.
Price
When you look at the price of both gold and platinum, you’ll notice that they are noticeably more than other precious metals, in particular, silver.
You’ll likely notice that when purchasing more than 100 grams of either metal, you are often talking about exchanging thousands of dollars for a bar of metal.
Historically speaking, platinum has always been the more expensive of the two elements. In order from cheapest to most expensive, it used to go: silver, gold, platinum and then palladium.
Today, however, this is not the case. Ever since the Great Recession of 2008/2009, people have heralded gold as a much safer investment than stocks, bonds, real estate and other investments.
As a result, the price of gold has skyrocketed in recent years, and is expected to do so in the future too.
As of the time of writing, gold is around 65% more expensive than platinum, although, both gold and platinum are currently seeing incredibly high prices due to what many have called the COVID Recession.
For the record, the aforementioned number is not including dealer premiums on either metal, which can differ greatly from dealer to dealer, and on the size and metal of the bar itself!
Safety Net
The overwhelming amount of the time, people who invest in precious metals such as gold and platinum don’t solely invest in precious metals. Instead, gold and/or platinum only make up a small portion of their portfolio.
Most commonly, they invest in stocks or bonds or real estate. However, in order to diversify and strengthen their portfolio, they invest in precious metals such as gold and/or platinum.
This creates what most investors refer to as a “Safety net”.
You see, stocks and real estate tend to do really well at the same times, usually, when the rest of the economy is booming too. During these times, precious metals are doing the complete opposite.
And when stocks and real estate aren’t booming, precious metals, such as gold and platinum, are. This is often the main reason why many investors invest in them to begin with!
For many investors, this is seen as the best of both worlds. When business is good, they earn millions from their stock/real estate holdings. But when business is bad, they are protected by having gold or platinum on hand.
During recessions, platinum typical outperforms gold to begin with. As the recession worsens, however, gold typically overtakes platinum and begin to grow much more than platinum does.
Volatility
As investors, we tend to hate volatility. Whilst volatility does have the ability to make you a lot of money, it also has the ability to lose you just as much, if not more!
Both gold and platinum are renowned for being fairly stable assets. Over the course of, say, the last 20 years, their price goes up and down, but gradually increases over time.
Gold is the more stable of the two metals. Over the course of the past 20 years, the price has gone from $5,676.92 to $43,728.40. Whilst this seems like a lot, it has gotten there gradually, not by just going up and down wildly.
Platinum, on the other hand is much more volatile. Over the course of the past 20 years, the price has increased from $13,321.70 to $25,574.60, but has gone up to as high as $38,034.30, and as low as $8,828.60.
For many investors, this makes gold the better investment. After all, it takes much of the guess work out of it all, and they know that as long as they hold gold for a little while, they’ll make a tidy little profit.
However, for just as many investors, this makes platinum the better investment. Yes, they can potentially lose just as much, they also have the ability to gain just as much as well!
Long Term Returns
The overwhelming majority of investors who buy gold or platinum do so and hold onto it for years, potentially even decades. Here, it sits and (usually) accrues value, until the owner chooses to sell it.
For many investors, we are interested in getting the best return on our investment, which is something that is very key for us.
The average precous metals investor buys and holds onto their precious metals for 20 years.
Assuming you’d bought $10,000 worth of gold and platinum 20 years ago, you’d be quite shocked to find out how much you’d actually made!
20 years ago, the price for a kilogram (2.2 lb) of gold was hovering at around $5676.92. Today, one kilogram of gold is worth $43,728.40, roughly increasing 651% in price.
At the same time, 20 years ago, one kilogram of platinum was hovering at around $13,321.70. Today, the same one kilogram of platinum would be worth roughly $25,574.60, roughly increasing 93% in price.
During the same time period, inflation was at around 162.1%. This means that by investing in gold, you’d have netted 488.9%, whereas with platinum, you’d have made a net loss of -69.1%.
This clearly makes gold the better investment long term, however, during this time period, platinum did have a peak that was far more than gold was during the same time.
Storage
When it comes to investing in precious metals, we as investors, tend to worry about how and where we are going to store our precious metals once we’ve purchased them.
Thankfully, most precious metal dealers offer to storage the precious metals you’ve bought from them. This can then be delivered to you at a later date, or sold back to them when/if the price of your precious metal(s) increases.
Occasionally, this is stored for free (if you buy a large amount of precious metals!) Most commonly, however, these dealers will store it for a percentage of the metal’s value or just a flat fee.
Regardless, many people prefer to store their gold/platinum themselves. Often, this is through the use of personal safes and/or security deposit boxes. Due to the density of both metals, you can often get away with purchasing the smallest!
Platinum is actually denser than gold, meaning that platinum bars are smaller than their gold counterparts. This means that platinum bars take up less room in your safe/safety deposit box, thus allowing you to store more platinum in total.
However, due to gold’s higher price, it actually takes up less room to store gold (assuming you purchased around $7,500 of gold or more!) than it does platinum.
Availability
Both gold and platinum are naturally-occurring elements. The only real way we can obtain them is by mining them. As such, they are considered to be finite resources and will eventually run out.
Over the past decade or so, there have been a number of studies compiled to determine when we will run out of precious metals like gold and platinum. And it’s not as far off as you might think.
Although studies vary, it’s estimated that we will run out of gold as early as 2030 or maybe 2031. Only a decade or so away. Studies also estimate that we may run out of platinum during the early 2030’s too!
Using this knowledge, people are hoarding precious metals, in particular platinum, gold and silver. They are banking on the fact that when we do in fact, run out of these metals, their price will skyrocket.
Here, they’ll sell their stockpiles and become millionaires overnight!
With that being said, these precious metal hoarders are hoarding one metal over the other: gold. For most people, gold is the obvious no-brainer. It’s more expensive to buy, therefore, its price will go up far more as well.
This is partly why the price of gold has increased so dramatically over the past decade or so. So many people have rushed out there and bought gold with the hope that one day, the price of gold will skyrocket and they’ll make millions.
Gold vs platinum? Which would you invest in? Tell me in the comments!
