Is Platinum undervalued?
Platinum is one of the forgotten members of the precious metals family.
I consider it is very undervalued, because the gold -platinum ratio is at its highest historic level. It means that gold is very overvalued with respect to platinum. The current level of the ratio is 1.36 and the historical maximum is 1.38.
As you can see in the historical chart of the ratio, during most of the last 27 years the ratio was below 1. The average values of the ratio are 0.81, 0.76, 0.93, 1.1, 1.27 during the last 27, 20, 10, 5, 1 years, respectively.
In order to understand the reasons of the increasing value of this ratio, we have to consider that platinum is a industrial and precious metal (as silver). The main industrial use of platinum is in vehicle emissions control, according to wikipedia this use stand for the 45% of the platinum sold in 2014. This use is mainly in diesel vehicles, and the production of this type of vehicles are in decline. Also it was reported that the Volkswagen emission scandal hit hard the price of platinum. This metal is also use in the production of fuel cells, this could be bullish for its industrial use.
However platinum is rarer than gold. The mine production of platinum is approximately 5 million ounces a year, where as the gold is 82 million ounces (Wikipedia data). The major mines and reserves of this metal are located in South Africa, Russia, and Zimbabwe.
The image shows an US platinum eagle coin, the image is from Wikepedia and chart source is denvergold.com
In this week I did some similar analysis: Gold-Silver and Bitcoin vs. Gold
Disclaimer: This is not financial advise
Platinum is over rated I think actually
have no utility in real world - is just a speculative asset.
The world is moving away from emission cars. Tesla is taking off and Volkswagen has recently announced that all their new cars will be half gas/electric. Trucks and other transport will follow suit.