Platinum Rises, But More Upside Awaits

It is intrinsic to human nature to follow established patterns and to resist changing long-standing habits.

Gold has long been recognized as a rewarding store of value, and it will likely require more independent thinkers to recognize the conditions that now favour platinum as a viable alternative.

For centuries, platinum has held its status as a precious metal, prized predominantly for jewellery and a reserve for central banks, consistently commanding a higher price than gold.

PLATINUM’s SHIFT TO AN INDUSTRIAL ROLE

The large-scale industrial application of platinum began only recently, primarily driven by its crucial role in the automotive industry to reduce vehicle emissions. This surge in demand led to increased platinum production and reshaped its public image—from that of a rare precious metal to a vital industrial commodity.

Currently, there is widespread concern that a prospective decrease in automotive demand may weaken platinum prices. However, this assumption may be misguided. Petrol-powered vehicles, especially diesel trucks, are expected to remain prevalent for many years, particularly now in the many upcoming emerging economies. In addition, numerous new industrial applications for platinum are on the horizon.

THE RETURN OF PLATINUM AS A STORE VALUE

Considering the aforementioned factors, it is reasonable to anticipate at least a partial shift from gold to platinum as a store of value. Platinum appears poised to regain its reputation in this domain.

Notably, it cannot be excluded that the Reserve Bank of South Africa may soon choose to add platinum to its reserves alongside its holdings of gold, in spite of its earlier denials. Should this occur, South Africa would set a global precedent in reaffirming platinum’s role as a store of value. Such a move would likely spur a significant increase in the price of platinum and provide lasting support to the South African mining sector and its workers, many of whom are low-wage earners.

Support for platinum is especially pertinent given that South Africa holds the majority of the world’s platinum reserves, while its gold mining industry continues to decline at an accelerating rate.

To date, it appears there have been no comprehensive summary comparing the advantages and disadvantages of platinum with those of gold. My insights presented here seek to assist both investors and decision-makers in making well-informed choices regarding these two metals.