Is platinum the new gold?

By: Jayson Derrick
Jayson Derrick
Jayson lives in Montreal with his wife and daughter, loves watching hockey, and is on a lifelong quest to… read more.
on Nov 30, 2020
  • Gold's rally has come to an end and the commodity has sold off from its August highs.
  • Platinum on the other hand is up 14% in November.
  • Is platinum set to replace gold as the premier metal investment?

Gold prices peaked in August at more than $2,000 an ounce and have since lost momentum and erased around four months’ worth of gains. Platinum on the other hand is up 14% in November and some are wondering if gold’s claim to fame has come to an end.

Platinum a play on clean energy

According to The Wall Street Journal, the growing demand for clean energy is a clear catalyst for platinum. While the science behind platinum is complicated, the brief explanation is as follows: renewable-hydrogen technology stores combustible gas from water in fuel cells that is then used to power homes and cars. Platinum plays a vital role in the process and will see increased demand as governments emphasize the importance of clean energy.

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The European Union, for example, pledged in 2020 to make renewable hydrogen an important component of its “European Green Deal,” according to WSJ. The group of nations is aiming to become carbon neutral within 30 years.

In the U.S. a potential Joe Biden administration will spend $2 trillion on green energy products. AS his prospects of officially being named president-elect in December increases by the day, investors are buying the commodity in advance.

Gold losing its appeal

At a time when platinum’s prospects seem to strengthen, gold’s proposition is faltering. The commodity has become one of the few go-to assets as a flee to safety amid the COVID-19 pandemic.

But as multiple vaccine makers are detailing their encouraging trial results with more to follow suit, investors are selling gold. The commodity closed last week’s trading session at $1,781.90 which marks its lowest levels since the start of July.

Simply put, gold is in the “latter stages of its run” while platinum offers investors a “longer-term growth story” that is in the early stages, Steven Dunn, head of exchange-traded funds at Aberdeen Standard Investments told WSJ.

Platinum demand exceeds supply

According to The World Platinum Investment Council, global demand for platinum will exceed available demand for the first time on record. Approximately 7 million to 8 million ounces of platinum are required each year although the lack of supply could be a result of COVID-19.

The vast majority of platinum comes from mines in South Africa. As of July, the country’s platinum sector recorded thousands of positive COVID-19 cases. South Africa’s mining industry employs 455,000 people of which 164,500 people work at or for platinum mining companies.

The longer-term demand story for platinum will surely outlast any near-term COVID-related disruptions. In the auto segment alone, a hydrogen fuel cell car requires nearly four times more platinum than a diesel car.

“The hydrogen economy requires fuel cells and fuel cells need platinum,”  Trevor Raymond, the World Platinum Investment Council’s head of research told WSJ.

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