Breaking News
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. More details

Shrinking Platinum-Gold Spread Enticing But Likely Short-Lived

By (Barani Krishnan/ 26, 2018 03:25
Shrinking Platinum-Gold Spread Enticing But Likely Short-Lived
By (Barani Krishnan/   |  Sep 26, 2018 03:25
Saved. See Saved Items.
This article has already been saved in your Saved Items

In the retail and music world, platinum is often thought to be more valuable than gold, a notion reinforced by the platinum credit card and the platinum record. In the commodities world, this also holds true whenever the white metal trades at prices higher than its yellow cousin.

Now, as platinum’s discount to gold falls at its most rapid pace in years, those playing the spread between the two are wondering how much narrower the gap will get—and whether the outcome could significantly change the pecking order in precious metals.

The difference, going forward, will not be very much, according to UK’s Metals Focus, which published an indepth study on the spread and the fundamentals of the metals on both sides of the game on Tuesday.

Gold Will Likely Stay On Top

The consultancy found that gold will likely remain on top of platinum through the end of 2018 and could even marginally expand its premium to the white metal of around $380 an ounce by next year.

“While platinum prices should rise over the short-to medium term, we do not expect this gap to fall significantly further,” it added.

Notwithstanding the surprise weakness in the dollar, this week’s headlines have raved at gold’s ability to cling to the $1,200 an ounce level that’s key to market bulls, despite an oncoming US rate hike.

Gold Weekly Chart
Gold Weekly Chart

But at a deeper level, the stories have questioned bullion’s woeful slide from 18-month highs of $1,361.40 in February. Year-to-date, gold is down 8 percent, with the US December delivery contract settling at $1,205.10 on Tuesday.

Platinum, meanwhile, is 11 percent lower on the year. Yet, it has performed relatively better to gold in recent days, hitting six-week highs of $839.00 on Friday. In Tuesday’s session, the most-active US platinum contract for January settled at $827.80.

Spread Historically Smaller

Historically, the spread between the two metals has seldom been as wide as this. Metals Focus’ charts show platinum having the advantage over gold for two years through January 2015, before it turned to a discount.

While the pace of the white metal’s recovery now—a deficit of $40 in its discount to gold within days—has got spread players excited, Metals Focus drew attention to what it described as unsupportive fundamentals for platinum.

Platinum Daily Chart
Platinum Daily Chart

The London-based consultancy, which gathers information from a database of 1,100 mines, cited comfortable supplies for platinum against weak demand from jewelers as well as carmakers which use the precious metal as an emissions purifier and performance catalyst in diesel engines.

Metals Focus said although low rand-based platinum prices in South Africa have led to some supply rationalization, higher revenues enjoyed by mines in that country from stronger palladium prices have kept them from cutting too much of their platinum output. Like platinum, palladium is also used in jewelry and is a catalyst for gasoline engines. Palladium currently trades at over $1,050 an ounce, or 25 percent above platinum due to its more superior fundamentals.

Metals Focus also said miner Sibanye-Stillwater’s (JO:SGLJ) proposed capital expenditure cuts at Lonmin (OTC:LNMIY), should it acquire the miner, would only lead to meaningful supply cuts from 2025 onward.

Lower Platinum Output Offset By Lower Demand

“This year, we, therefore, expect global mine supply (of platinum) to slip by 2 percent to 6.0 million ounces,” Metals Focus said.

That drop will be offset by an identical 2 percent deficit in global platinum demand as the white metal faces pressure on both the jewelry and automotive fronts, the consultancy noted. The firm added:

“Although diesel’s (engine) share in Europe appears to have stabilized over the past four months, we still expect global automotive platinum to drop by 3.7 percent in 2018 to 3.2 million ounces.”

On the whole, the platinum market will likely see a surplus supply of around 190,000 ounces this year, Metals Focus added.

“By itself, this is not significant. However, this will mark the seventh surplus since 2010, which means that platinum’s above-ground stocks, will have risen by some 2.2 million ounces between end-2010 and end-2018, to a noteworthy 8.8 million ounces.”

Gold May Strengthen Despite Current Tame Outlook

Gold, despite its tame outlook now, will strengthen if bets for a US economic slowdown in the medium-term come true, prodding investors towards risk-off assets, Metals Focus said. “We also expect the dollar to weaken as (this) dynamic encourages the Fed to adopt a more dovish stance.”

In conclusion, Metals Focus said it expects gold to average at around $1,330 in 2019, against $940 for platinum, translating to a discount of $390 for the latter. That’s hardly a change from today’s levels, meaning platinum-gold spread players ought to be more wary than excited.

Shrinking Platinum-Gold Spread Enticing But Likely Short-Lived

Related Articles

Peter Krauth
A Golden Election Promise By Peter Krauth - Nov 03, 2020 1

There’s no shortage of prognostications or conjecture about the U.S. election. Of course, everyone has an opinion. Some like red, some like blue, some like neither. Last week’s...

Shrinking Platinum-Gold Spread Enticing But Likely Short-Lived

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email