A Pretty Sure Bet on Platinum
Since just after the year 1900, platinum has held a premium to gold. First recognized as a metal by Italian scholar Julius Caesar Scaliger in 1557 during his travels in the Choco Region in Colombia, the Indians of the area believed the metal was young or undeveloped gold. There are stories of how the Spanish in Colombia used platinum nuggets as filler when casting brass cannon since they had nothing that would heat the metal to a melting point and considers the material waste.
Until discovery of platinum for use as a catalyst in oil refining in the very early 20th century the metal was little more than a novelty with little value. But once the utility of the metal became known platinum has almost always held a premium to gold. When gold rocketed to $875 an ounce in early 1980 platinum soared to nearly $1100 an ounce. Platinum peaked at $2250 in 2008 while gold didn’t peak until September of 2011 at $1923.
Gold went to a slight premium to platinum during the financial crisis of 2008 and then to a $150 premium to platinum in 2012. On Wednesday September 23 of 2015, gold managed to make a $203 premium to platinum for the highest spread in history.
For all the screams of anguish about how silver is the most manipulated commodity in world history; silver is down 70% from its high, rhodium is down 92% from its all time high. No one is harping about how rhodium is manipulated. Gold is down just over 42% from the all time high in 2011 but platinum is down 60% from its high. But all we hear is how gold is the most manipulated metal in history. Perhaps the whole “manipulation” issue is simply noise from guys trying to sell newsletters. No one is screaming about how platinum is manipulated. It’s a market, it goes up, it goes down.
I’ve said it before. Buy cheap, sell dear. In early August I wrote about how the CRB was the lowest in constant dollars in 59 years of being measured. While everyone and his brother was writing about how we were in deflation and commodities were tanking, I said that we were at a tradable low in commodities. The CRB promptly rose 15% as I had predicted. It will continue to rise.
If you go back 115 years in the history of gold vs platinum prices, platinum has never been this low before in comparison to gold. If you shorted gold and went long platinum with a $203 dollar spread in the favor of gold, it would be profitable 100% of the time in the last 115 years.
Remember, buy cheap, sell dear. Platinum will eventually return to the normal premium to gold.