Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Platinum to Gold Ratio and Detecting Bubbles

Commodities / Gold and Silver 2011 Jun 22, 2011 - 02:31 PM GMT

By: Willem_Weytjens

Commodities

An article on BespokeInvest about the Platinum-to-Gold ratio today drew my attention.
I therefore wanted to get to know more about this ratio. I knew that the ratio had been trading around 2 over the last 10 years, which was why I invested heavily in Platinum and its little sister metal Palladium in December 2008 and early 2009 when prices crashed, and Platinum became cheaper than gold (the ratio thus dropped below 1). When the economy rebounded, the ratio rebounded to 1.50, but the last couple of months, it has been declining again, and is approaching 1 again, as it is currently at 1.13 with gold prices around 1546 and Platinum around 1742.


I thus started to dig deeper and found historical data at kitco.com
I created an excel sheet with monthly average prices since 1968 which is available for download HERE .

Below you can see some interesting charts that resulted of some calculations in the Excel sheet.
The first chart is the nominal absolute price difference between one ounce of Platinum and one ounce of Gold.
We can see that the difference was skyhigh early 2008, and then crashed. It went even negative for a couple of days (not shown in the chart, as this chart shows monthly averages), meaning that at some point gold was more expensive than Platinum:

The second chart shows the Platinum-to-Gold ratio since 1968, and shows how many ounces of gold you can buy with one ounce of Platinum. From this perspective, it looks like the Platinum-to-Gold is very low at the moment, just like the article at BespokeInvest stated. However, this chart might be misleading, as the huge spike in 1968 takes away all the attention.

I therefore removed the data until 1971 in the following chart, which gives us a clearer image of the period from 1972 until today:
As we can see, the ratio was as low as 0.75 in 1982 and as low as 0.73 in 1985 (see the excel sheet for more detailed information).
The average ratio between 1972 and 2011 was 1.36. We can also see that the ratio found “support” at 1.00 a couple of times.

Can we detect bubbles using these charts? Maybe. Let's check it out.

The Platinum-to-Gold ratio topped twice around 2.35: once at 2.34 in January 2001 and once at 2.31 in May 2008.
At both times, a major economic crisis followed, causing the ratio to drop sharply.
The ratio bottomed at 0.75 in September 1982, after the Gold bubble had popped a year earlier. So who knows, maybe this ratio might help us next time spotting a bubble?

Where are we now? Hard to say, although a ratio of 1 has provided support in the past.
If we use some imagination, we can see similarities between the early '70s and today:

For people who want more information about why people invest in Platinum, I think  this article from CPMgroup from 1995 might be an interesting read.

Willem Weytjens
www.profitimes.com

© 2011 Copyright Willem Weytjens - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in