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What drives platinum?

Topics [ Australian Kangaroo platinum bullion coin ]

With our Australian Kangaroo 1oz pure platinum coin available from today, we look at the history and drivers of the ‘third’ investment metal.

Compared to gold, the amount of platinum mined throughout history is minuscule. Much rarer than gold, it’s estimated the entire stock would fit inside the average living room.

Platinum was worked by pre-Columbian Americans to produce artefacts of a white gold-platinum alloy. Because it proved difficult to separate from gold nuggets, the conquistadors are said to have considered it a nuisance!

We know it today as a derivation of the Spanish term platina, which literally translates as "little silver".

Offering investors the chance to acquire 99.95% pure platinum, The Perth Mint has released its 1oz Australian Kangaroo Platinum Bullion Coin for 2019.

When platinum reached Europe in the 18th century it was hailed as the eighth known metal - after gold, silver, copper, tin, lead, iron and mercury.

Scientific study went on to list it as an element – one of the basic chemical building blocks of matter. It is one of the so-called ‘transition’ metals (others being gold, silver, copper and titanium) because it bonds easily with other elements.

Denser and heavier than both gold and silver, platinum is extremely malleable (easy to shape) and ductile (stretchable). Under normal conditions, it’s also immune to corrosion.

Today, platinum is useful in a range of industrial, scientific and medical applications. Chief among these is its role in automotive exhaust emission control devices called catalytic converters. Platinum is particularly effective at converting harmful emissions such as carbon monoxide and hydrocarbons into water vapour and gases less damaging to the environment and human health.

Accordingly, around 40% of global platinum demand has been used in auto catalysts over the past five years. Meanwhile, jewellery accounts for the second largest slice - nearly 30%. Strongly associated with love, it enjoys particular esteem among buyers of engagement and wedding rings.

Historically, the price of platinum has tended to trade higher than gold. During the past decade, however, this situation has been reversed. As a measure of how many ounces of platinum you can buy with an ounce of gold, the current gold-to-platinum ratio is around 1.4.

Will platinum revert to its traditional premium over gold? Conventional wisdom suggests this should occur during periods of sustained economic stability and growth. For those who keep an eye on the price of platinum, declining supply from South Africa, which accounts for about 70% of the world's production, is another critical factor.

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