Gold Price Exceeds Platinum

posted by Nima

August 10, 2011 · Posted in Investing 

For the first time in 2 1/2 years the gold price has exceeded that of platinum.

Back then the trend was reversed immediately.

According to Reuters this time gold is set to widen premium over platinum:

Gold prices rose above those of platinum for the first time since December 2008 late on Monday. The last time this happened, the situation reversed within a few days, and traders said then that the convergence of the gold-platinum ratio gave a clear signal to sell gold and buy platinum.

Today’s backdrop is very different.

“Gold as a defensive asset is being driven higher at the moment by risk aversion, and platinum as a cyclical asset is under pressure because growth is slowing,” said Michael Widmer, an analyst at Bank of America-Merrill Lynch.

“We were there around the great recession (2008), and then you had the various stimulus packages hitting the market, and you saw the prices of the two metals starting to diverge again,” he said. “The macro picture is a bit different this time around. I don’t think that it is a compelling trade.”

In contrast to the situation in 2008, gold’s premium to platinum is a function of its own strength, rather than a falling platinum price.

… interesting times.

Gold is a money commodity, platinum is not, at least it doesn’t seem to be acting like one.

In deflation money does well, all other commodities tank. I have said it many times before and over the past 3 years we have seen this theory confirmed beautifully.

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