Is platinum becoming the cheap alternative to gold?

The extensive rise in platinum prices this year has been surprising. The metal has even surpassed gold with a 40% increase in prices since the beginning of the year. 

On Monday, platinum prices surpassed $1,200 per ounce, marking a four-year high as the metal continued its ascent at the start of the new trading week.

At the time of writing, platinum prices were around $1,250 an ounce. 

Platinum currently trades up 27% since May 20 and 40% year-to-date, outperforming gold’s 27% year-to-date rise.

Shortly after US President Donald Trump announced reciprocal tariffs, platinum briefly dropped to $900 at the start of April.

“The price explosion came largely as a surprise,” Carsten Fritsch, commodity analyst at Commerzbank AG, said. 

The physical platinum market has been tight for years without the price being able to benefit from this, apart from brief price spikes that never lasted long.

Cheap alternative to gold?

Another significant factor contributing to platinum’s lagging performance has been the sharp increase in gold prices.

This dynamic led to a continuous widening of the price gap between gold and platinum, at times exceeding $2,400 in April.

“At that time, gold was three and a half times more expensive than platinum, which had never been the case since exchange trading in platinum began almost 40 years ago,” Fritsch added. 

This has apparently led to a reassessment by market participants, who see platinum as a cheaper alternative to gold.

Strong inflows into platinum ETFs and rising demand from the jewellery industry demonstrate the above trend.

ETF holdings increased by 87,600 ounces on Monday, almost doubling net inflows to nearly 180,000 ounces since the beginning of the quarter, according to Bloomberg.

Platinum’s price surge has reached extreme levels, suggesting a correction is likely, according to Fritsch.

Platinum’s undervaluation has significantly decreased recently. 

The price discount to gold has narrowed to just $2,070, and the gold-to-platinum price ratio is now a favorable 2.6, marking its lowest point since late October 2024.

Palladium continues to lag

Recently, palladium’s price has also risen, following a similar trend to platinum.

On Monday, the price reached its highest point in seven months, just under $1,090 per troy ounce.

The palladium price discount to platinum at one point on Wednesday was $190, which was last the case eight years ago. Currently, it is around $174.

“The weaker price trend is due to the less favourable fundamental data for palladium,” Fritsch said. 

Metals Focus anticipates a palladium market deficit of 254,000 ounces this year. 

This is significantly less than last year’s deficit and also lower than the projected platinum deficit, though the market is still expected to be undersupplied.

A significant drop in demand, particularly from the automotive sector, is anticipated.

Simultaneously, an increased supply of recycled materials from the same industry is expected to mitigate the severity of the supply deficit in the palladium market.

Additionally, this year, the world’s largest processor of platinum group metals anticipates the palladium market will be balanced.

Fritsch added:

The times when palladium supplies were tight are therefore coming to an end.

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