Historically, reversals in the traditional relationship between gold and platinum have been short lived.
(1888PressRelease) January 26, 2012 - MIAMI, FL - The premium at which gold is trading relative to platinum is currently around $120 - and shrinking. Traditionally, the situation is reversed with platinum trading at a premium to gold. It is far rarer than gold and was declared by Louis XV to be "the only metal fit for a king" due to its rarity and beauty. Since August 2011, platinum has been trailing gold in price; a situation that is anomalous and likely to be relatively short lived. It can only be a matter of time before the 'normal' relationship between platinum and gold is restored and we are likely, therefore, to see a significant increase in the price of platinum in the near future.
The greatest demand for platinum comes from the automotive industry, where it is used in the manufacture of catalytic converters. As such, the price of the metal tends to rise according to the strength of that industry. Ironically, platinum's current lower price means that jewelry makers are now choosing to use the white metal in place of gold. This, of course, also serves to increase demand for platinum. At the same time, supplies of raw platinum ore are extremely scarce.
"Platinum is currently trading at around 92% the price of gold, suggesting that it is still significantly undervalued," says Bill Hionas, CEO of Pan American Metals of Miami, a South Florida precious metals company. "Platinum sees most of its demand coming from the automotive industry, although jewelry also accounts for some physical demand. Investment demand is also likely to grow as soon as we have some kind of resolution of the European debt crisis."
Pan American Metals of Miami, LLC is a group of traders, investors and account executives that combines many years of experience to help clients invest in bullion. PAMM provides an individual investment service and is based in Miami, Florida for convenient access to both North and South American investors.