The Economist’s Guide to the Gold-to-Platinum Ratio

Platinum bars

Investors are probably familiar with the gold-to-silver ratio, which determines how much silver it would take to purchase an ounce of gold. This ratio can be useful to investors choosing between the two metals. If the number is high—buy silver. If the number is low—buy gold.

You may not realize, however, that other precious metal ratios exist to help investors make informed decisions about the market. The gold-to-platinum ratio, for example, can help us predict investor confidence in the economy.

Trends Show Gold Performs Better in Times of Economic Crisis

At one time, industrial demand drove platinum values, which led to low gold-to-platinum ratios ranging between .41 and .70. This trend, which occurred in the years leading up to the 2008 economic crisis, revealed a rally for platinum that did not trickle into gold values. These increases in platinum values did not continue though.

Following the financial crisis of 2008, platinum prices plummeted from $2,000 an ounce to $800 an ounce. The gold-to-platinum ratio rose from .43 to .99. The parity between gold and platinum showed strength in gold values despite economic distress. This security in gold bullion investing continued as gold values raised from $800 an ounce to $1,800 an ounce between 2008 and the end of 2011.

Since then, the gold-to-platinum ratio has gone up and down, seeming to stay near parity. However, since January 2015 the ratio has increased dramatically, hitting high levels that haven’t been seen since the early ‘80s.

This increase in gold’s value over platinum indicates the struggle for the market to truly recover. As demand for gold has outpaced platinum, one can assume that the demand for the yellow metal is driven by uncertainty in the economy.

If that uncertainty has any precedent to coming economic hardships, gold would be one of the only safe-haven investments out there.

To learn more about how gold can help you secure your wealth, read our article: The Gold-to-Silver Ratio: A Tool For Investing in Precious Metals .

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