Sjuggerud: A major extreme in platinum
From Dr. Steve Sjuggerud, Editor, True Wealth Systems:
Platinum just hit its cheapest level EVER relative to gold.
Both metals started 2017 up double digits. And while gold is still up 6% year to date, platinum has erased all of its gains.
Importantly, this fall pushed platinum to its cheapest level compared to gold in history. And that makes platinum a much better long-term “buy” than gold right now.
Let us explain…
Platinum almost always trades for more than the price of gold. It makes sense… Platinum is rarer than gold. There’s less of it. It also has industrial uses, like in catalytic converters. That means it actually gets used up – gold doesn’t.
For these reasons, platinum has traded for more than gold 86% of the time since 1987, as far back as our data go. But today the script has flipped… in a big way.
Today, platinum trades for its biggest discount to gold ever – a massive 25%. This is rare, as the chart below shows…
As you can see, platinum has significantly underperformed gold in recent years. The result is the most extreme the platinum-to-gold ratio we have ever seen.
History says this won’t last long…
The platinum-to-gold ratio bottomed in December 1996. What happened next? Platinum went from trading at a razor-thin discount to a premium of 35% in less than two years.
More recently, this ratio bottomed in July 2012 with platinum at a 12% discount to gold. And the metal went on to surge to a 16% premium to gold by May 2014.
So history says that this extreme will unwind, but it can actually happen in two separate ways… Either the gold price could fall dramatically and become cheaper than platinum, or platinum could soar to catch up with the gold price today.
We can’t know which will happen. But we’re long-term believers in gold. So a dramatic fall in gold prices seems unlikely. If we’re right about that it could mean a dramatic move higher in platinum prices.
Either way, platinum is now at its cheapest level ever compared to gold. This is a major extreme… And history says it likely won’t last long.