Wednesday, August 10, 2011

Gold vs. Platinum

The stock market has been on a roller coaster ride in the last week.  The drops have been more than the ups.  This is very bearish news for the stock market and the economy in general.  Of course, if you have been paying attention and you understand Austrian free market economics, then none of this comes as a shock to you.

Even less shocking, although notable, is the huge run in the price of gold.  It topped over $1,800 per ounce today.  People are buying gold due to economic uncertainty and fiat currency uncertainty.  The interesting thing is that the other metals have not been on this same run.  Even gold's cousin, silver, has not done that well.  If silver is the poor man's gold, then I guess rich people are buying right now.

The other notable thing is that, as of closing today, an ounce of gold is worth more than an ounce of platinum.  I discussed this in a blog post last month.  Platinum is typically more expensive than gold.

In today's environment, it is easy to see why gold is doing so much better.  Gold has a history of being money.  Platinum is more of an industrial metal, often used for cars.  Gold is primarily used for jewelry and investment.

Another factor right now is the fact that many foreign central banks are buying gold.  They are certainly not buying platinum.  Bernanke says that central banks hold gold because of tradition.  But the reason it is tradition is because gold acted as money for thousands of years.  Central bank buying is probably helping in this gold explosion.

I am even more adamant now that platinum might be a good speculation at this point.  The gold to platinum ratio is now over 1 to 1.  While ratios don't always mean anything, it can be useful for speculative purposes.

I think the last week has confirmed my overall strategy of investing in a permanent portfolio setup, as described in Fail Safe Investing.  I am also an advocate of holding far more gold than silver.  I am not against silver as a speculation, but gold should be a rock in your portfolio.  It is there for more stability and a hedge against inflation.  Silver is much more volatile.

So while I am still advocating that a majority of your portfolio be in the permanent portfolio and that most of your precious metal holdings remain in gold, I think there are opportunities for speculation.  If you want take a very small portion of your investments and buy platinum, I think now would be as good of a time as any.

After my last post on platinum, there was an anonymous comment listing ETFs and ETNs.  If you don't want to buy and take possession of the actual metal, then PPLT looks like a good alternative that you can easily trade through a brokerage account.

1 comment:

ahnn said...

Either of two, you're on the right path. They are wise investment. They've already proven it.

cash for platinum