gold coin
Eric Golub/Flickr

(INTELLIHUB) — For many years platinum led gold in value and fetched a higher price per ounce, and it is more rare than gold, but does that make it a better investment? Not necessarily.

For starters, gold has been used for centuries as currency and a failsafe to hedge against fiat currency devaluation, and has been used for jewelry and art.

Gold is unique in color, while platinum shares similar features with palladium, silver, rhodium and other elements. Thus the demand for gold jewelry has always exceeded that of platinum, and that trend will continue.

Gold does not react with chemicals and toxins in the air, which means that it usually maintains its iridescent glow. Additionally, platinum is much harder than gold, and therefore is more difficult to fashion into jewelry.

Now let’s briefly examine the investment valuse of these two rare metals. Across the world, central banks utilize gold as a hedge against market fluctuations, not platinum.
When it comes to precious metals, gold is the ultimate commodity.

Recently, the German Bundesbank demanded its gold reserves from both France and the United States in a move to repatriate the precious meatl back to Germany. When central banks across the world begin to scoop up gold, or demand its repatriation after being stored abroad for decades on end, investors need to take note.

Venezuela, which is in the midst of a severe financial crisis, is taking an opposite and rather dubious approach to resolving its currency problems. According to Reuters, the Venezuelan Central Bank is considering a gold swap with Deutsche Bank in order to increase its foreign reserve liquidity in the face of triple digit inflation and plummeting oil prices on the global market.

“In December [2015], Deutsche [Bank] and Venezuela’s central bank agreed to finalize a gold swap … the sources said …. Gold swaps allow central banks to receive cash from financial institutions in exchange for lending gold during a specific period of time.”

So let’s step back and look at this. Germany demands a repatriation of hundreds of tons of gold, while simultaneously loaning Venezuela currency for a chunk of its gold reserves as a guarantee. Interesting. Are any bells going off people? They should be.

But let’s jump back to platinum for a moment. When is it a good time to invest in platinum? One, when there is economic growth, and two, when the prices of oil drop.

Platinum has a lot of industrial uses and its demand is “industry-driven” versus something purchased directly by consumers, as gold is. Platinum is used in catalytic converters, and bigger vehicles use larger catalytic converters and therefore larger quantities of platinum are needed for the fabrication of those converters.

So if the “going green” trend continues, equating to more stringent emission standards, or the price of petroleum continues to decrease, resulting in a higher demand for larger vehicles, the demand for platinum would normally increase due to an increase in automotive industrial demand.

But there is a caveat. Platinum is a good investment when there is a bullish global forecast, on the flip-side, if the world economy enters a downward spiral and fiat currencies begin to devaluate, platinum prices will not jump, regardless of the price of petroleum or a “going green” trend.

So if you want to make a safe investment, gold is the more prudent choice.

The author of this article, who prefers to use the nom de plume “XKeyscore” in order to maintain his anonymity, is a Doctoral Candidate and multiglot with two Master’s Degrees and a Baccalaureate specializing in Middle Eastern Studies. He holds one Master’s Degree specializing in Intelligence and Counter-intelligence operations, and a second Master’s Degree in Security Studies. XKeyscore has studied under a United States intelligence agency analyst and now-retired, high ranking, American military officers. XKeyscore writes exclusively for Intellihub News & Politics. Read more articles by this author here.

Image: Eric Golub/Flickr