Why has platinum never been as valuable as gold? Investment opportunities emerge in 2024

Many people have heard of gold investment but know very little about platinum (Pt). However, the investment logic of these two precious metals is completely different, and this difference precisely explains why platinum prices have been sluggish for a long time but show signs of a turnaround in 2024.

Why Has Platinum Always Been No Match for Gold? The Underlying Attribute Differences

Data from the past decade is clear: gold prices have significantly outperformed platinum. Looking at a longer time horizon, this trend becomes even more evident. Many investors are puzzled—both are precious metals, so why is their fate so different?

The secret lies in financial attributes comparison. Gold is a purely monetary asset with minimal industrial application, so an increase in the Federal Reserve’s money supply directly pushes up gold prices. Over the past twenty years, US money supply has almost continuously grown, becoming a long-term driver for gold. Even during phases of correction, it was just a slowdown in money supply growth, not a true contraction.

Platinum, on the other hand, is less fortunate. Its industrial properties account for a much higher proportion, especially as a catalyst in automotive exhaust systems, which fluctuate with economic cycles. When the economy is booming, car production increases, and so does platinum demand; during downturns, the opposite occurs. This means platinum prices are more constrained by real economic factors rather than purely by monetary policy.

Clear data comparison: against the backdrop of continuous growth in US M2 money supply, gold has risen from less than $300 in 2000 to over $2000 now. But platinum? From around $500 in 2000 to over $900 today. The difference in growth is stark, fundamentally because gold’s financial halo is more dazzling.

Why Does Platinum Have a Chance in 2024? Three Major Positive Factors Are Converging

It seems platinum is destined to lose, but the situation in 2024 is changing.

First signal: US money supply growth rebounds

Since the second half of last year, the US M2 growth rate has bottomed out and started to rebound, continuing into this year. Although the increase isn’t large, it’s a positive for precious metals. As a precious metal, platinum will also benefit from a loose liquidity environment.

Second signal: Automotive production resumes growth

The real investment highlight for platinum lies in industrial demand. Global car production is steadily increasing, with the Chinese market maintaining a significant annual growth rate since 2020. Catalytic converter demand has increased accordingly, directly boosting industrial demand for platinum.

More importantly, the substitution effect of platinum for palladium is unfolding. Palladium prices have long been higher than platinum, but palladium heavily depends on Russian supply (accounting for 40% of global palladium). Facing geopolitical risks, automakers are starting to replace palladium with more cost-effective platinum. This substitution is expected to continue until 2025, meaning platinum demand will be additionally supported over the next two years.

Third signal: Supply shortages become a long-term theme

The World Platinum Investment Council (WPIC) reports that platinum has entered a period of continuous shortages starting in 2023, which could extend until 2027. Tight supply and rising demand create a logical basis for price increases.

Investment Opportunity Assessment: How Big Is the Profit Margin?

The authoritative organization Helios forecasts platinum prices in 2024 to range between $800 and $1100. The current price is around $900.

Calculations: $100 downside, $200 upside. The risk-reward ratio is 2:1, meaning even if prices fall, the downside is limited, while the potential for rebound doubles. For investors, this offers a relatively balanced risk-return profile.

Another technical indicator worth noting is the current COT (Commitment of Traders) index for platinum, which is at a ten-year low, indicating heavy short positions. Once the market starts to move upward, these short positions may be forced to cover, pushing prices higher. The current level already presents an entry point.

In the Long Term, Platinum May Not Always Be Less Than Gold

Although gold, with its strong financial attributes, usually leads in price appreciation, the opportunities for platinum in 2024-2025 should not be overlooked. Three positive factors are stacking: accommodative monetary policy, expanding industrial demand, and palladium substitution benefits.

From a broader time horizon, the world is facing a supply-tight situation for precious metals. Whether gold or platinum, their long-term scarcity is increasing. Investors can participate in platinum trading through instruments like contracts for difference (CFDs) to capture this opportunity with lower capital requirements.

The key point to understand is: platinum’s lower price is not because its quality is inferior to gold, but because of different attributes. When both industrial and financial cycles are favorable, platinum may even become a more flexible choice.