John Tsang grew up in a town whose economy depended on precious metals. His investments include precious metals.
Anyone who has ever been to a jewelry store will have come into contact with gold. It is arguably the most popular of all the precious metals, and for good reason. The history between humans and gold goes back thousands of years.
Another precious metal that people are not as familiar with, but which they may encounter when shopping for jewelry, is platinum. The history of platinum is not as long as that of gold, but it has become an alternative choice if one wants to own something made of precious metals. For instance, a ring may come in two versions: one made out of gold and the other out of platinum.
People may ask which of these two options, gold and platinum, is the right choice. To make an informed decision it may help to know some of the less obvious differences between gold and platinum.
Some Differences Between Platinum and Gold
Obviously, gold and platinum they differ in color, but they also differ in density and hence weight. If you've ever compared, for instance, a one-troy-ounce coin made of platinum and another made of gold, then you may have noticed that the platinum coin is somewhat smaller in size. They both weigh one troy ounce, but the gold coin is larger because platinum is denser.
Platinum is also much harder than gold. While 24-carat gold, or gold with a fineness of three nines, is quite soft and will bend, pure platinum is tough enough to withstand the wear and tear of daily use. To make gold hard enough to be worn, it needs to be reduced in purity by combining it with at least one other metal. That's why you have 22-carat gold, 18-carat, and so on. White gold, for instance, is gold combined with other metals to alter both its look and toughness.
Misconceptions About Platinum in Relation to Gold
A common misconception that some people have is that platinum is more precious than gold and therefore more valuable. This misconception is often reinforced by mainstream media. Take for instance credit cards. A platinum credit card usually has a higher limit than a gold card to signify it is of higher status. This reinforces the impression among the general public that platinum is more valuable than gold.
Another example can be found in the music record industry. In the U.S., a music album is certified gold after it has sold 500,000 copies. If the number sold exceeds 1,000,000, it is certified platinum. Again, this creates the impression that platinum is superior to gold and therefore better than gold.
Nevertheless, the truth as to which of the two, platinum or gold, is more precious is not as straightforward as some people think.
Platinum Is Less Rare Than Gold Underground, but Gold Is Less Rare Above Ground
A misconception surrounding platinum is that it is much rarer than gold. It is true that the amount of gold above ground far exceeds that of platinum. But this is because the amount of gold that is mined worldwide far exceeds that of platinum. Furthermore, the mining of gold dates back all the way to antiquity thousands of years ago.
On the other hand, platinum mining only started in earnest a few hundred years ago. Being a precious metal, gold is usually stored and kept safe by its owner. What this means is that most, if not all, of the gold that has ever been mined is still present with us today. The combination of higher gold production and the fact that gold mining has taken place for much longer results in less platinum than gold in the world above ground.
If you take into account the platinum that is present underground in the earth's crust, the picture becomes much more complicated. In fact, data from the U.S. Geological Survey (USGS) indicates that platinum is actually more common than gold in the earth's crust.
Platinum Is Usually (but Not Always) More Expensive Than Gold
A big reason platinum is thought by many to be more valuable than gold is that the latter is, more often than not, priced lower. Prices for gold and platinum tend to track each other quite closely, but, generally speaking, gold tends to be less expensive than platinum most of the time. Combine higher prices with the perception that platinum is much rarer than gold and you get the impression that platinum is worth more than gold.
At the same time, it is also true that there are times when gold is more expensive than platinum. Anyone who keeps track of gold and platinum prices, and has done so long enough, should have noticed this.
So how does one explain the pricing of gold and platinum? To better understand how prices for gold and platinum are determined, it is important to look at supply and demand.
Supply and Demand Determine How Much You Pay for Platinum and Gold
Supplies of gold far exceed that of platinum, at least above ground. On top of that, platinum mining is highly concentrated in one country: South Africa accounts for roughly three-quarters of the total production of platinum. It's not hard to imagine that if something negative was to occur in South Africa, a labor strike for instance, platinum prices will rise as there is not much of an alternative.
In contrast, gold mining occurs pretty much in every corner of the planet. A supply disruption somewhere will have much less of an impact on prices. The mining of gold is also much easier and less costly than platinum on average. A good portion of it is found on the surface, for example along a river. Single men can set out as gold prospectors and try their luck with only their bare hands and a few tools. This has been going on for thousands of years and it still happens to this day.
On the other hand, platinum is usually found in deep underground mines as a byproduct. Platinum mining often requires difficult extraction from hard rock. This is a costly process, which is only affordable to big companies with expensive machinery.
Demand for Platinum Is Much Less Stable in Comparison to Gold
Although platinum is a precious metal, its end use is often like that of industrial metals such as copper or aluminum. The biggest use of platinum is in the automobile industry, in catalytic converters. Investment and jewelry use are of secondary importance. The global move towards a cleaner environment and stricter emission standards increased the demand for platinum.
A poor economy means that there is less demand for the heavy machinery, vehicles, trucks and so on that are powered by engines containing platinum. A good economy generally means that platinum demand will be on the rise. So the fortunes of platinum are very much tied to global economic conditions, whether they are good or bad.
Gold is primarily used as a way to store a person's wealth or savings, whether it is in the form of an investment, jewelry and so on. Gold is much less likely to experience the wild swings in demand that platinum experiences.
With both its supply and demand vulnerable to extreme fluctuations, it is not surprising that platinum can sometimes be cheaper than gold even if the reverse is true most of the time.
So Which Is the Better Pick? Is it Gold or Platinum?
Gold is arguably the safer option as it's well known all throughout the world. Platinum is not as familiar to everyone on the planet. Platinum does not have the same status that gold has in the culture and history of people around the world. You can go anywhere on the planet and people will recognize gold and offer something for it in return.
You are more likely to have a harder time doing that with platinum. Some people might mistake it for silver, which is worth much less than either gold or platinum. The tendency of platinum to be more expensive then gold and at times to be cheaper is an issue. If preservation of wealth or savings is the primary objective, gold is a better fit than platinum.
Platinum Is Worth Extra Consideration When it Is Cheaper Than Gold
However, when platinum is cheaper than gold, there is an opportunity to find a bargain. Suppose you were to buy platinum when it's less expensive than gold. If prices go back above that of gold, you will wind up with a profit from such a move. The drawback is that you may regret getting platinum if prices continue to stay below that of gold or drop even more as prices can fluctuate greatly over the years.
Both gold and platinum are noble metals in that they are highly resistant to corrosion. Do remember that the same may not be true of the metal used in conjunction with gold to stiffen it. This is why gold jewelry can experience discolorations or some other imperfection due to the presence of another metal that does react with the air. Platinum, on the other hand, is very durable and can easily withstand the grind of daily use without the addition of other metals.
In the end, the answer to the question as to which is better is that it all depends. It's a personal choice that can vary from person to person. Both platinum and gold have their pros and cons and every person has to decide for themselves what it is that they value more.
Gold is less risky and should probably be considered the first option for most people. With platinum, you are more likely to find a good bargain, but you're also more likely to risk experiencing buyer's remorse. You decide.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2017 John Tsang
Stephen on December 11, 2019:
Me and my mom read this article and we'll have to decide to draw our own conclusions what's best for me gold is the Longshot in case s*** hits the fan it's much easier to barter for my mom she says well I don't know Platinum I disagree media hype what do you think
Erudite Schlolar on December 18, 2018:
I found this article to be a very interesting and useful comparison between Gold and Silver. I previously held the false notion that Platinum is more precious than Gold. I have thought about investing in precious metals and I am of the opinion that Gold is a better investment than Platinum.
Thanks for sharing the excellent golden nuggets. ;-)
buzguy on January 15, 2018:
So where is the picture of a platinum ingot?