SUSIE GHARIB: Here’s another intriguing development in the markets today.
Gold is now outshining platinum. Prices for the yellow metal have surpassed
those of platinum, something that is historically unusual. Erika Miller
takes a closer look at what’s behind this switch and what it says about the
outlook for the economy.
ERIKA MILLER: Platinum is often called the rich man’s gold and the most
precious of precious metals. Platinum is more rare and more expensive to
mine than gold, so it normally trades at a higher price to its neighbor on
the periodic table. But starting last September, that relationship turned
upside down. Analysts say the reversal reflects gold’s growing investment
GEORGE MILLING-STANLEY, PRINCIPAL, GEORGE MILLING-STANLEY ON GOLD:
That has lifted the overall demand for gold specifically as an investment,
but also as a reserve asset for central banks and governments. And that, I
think is what finally culminated in at last, the switch from gold trading
at a discount, to platinum, to gold trading at a premium.
MILLER: The fact that gold is delivering shinier returns than
platinum may be a negative economic omen. Both metals are used in jewelry,
but platinum has far more industrial uses. In fact, about half of the
world’s platinum is used for catalytic converters. That’s the part of the
car that removes pollutants from exhaust.
MIHIR DANGE, PRECIOUS METALS TRADER, ARBITRAGE: Platinum is basically
a consumable material, so it’s supply and demand that really drives the
need for platinum, whereas gold is used as more of a hedging instrument.
MILLER: Many analysts think gold will continue to hold the upper
hand. A recent survey of metals forecasters predicts gold will average
$1,766 an ounce this year versus $1,624 for platinum. Part of the reason
some analysts are more bullish on gold is ease of investment, thanks to the
growing number of gold exchange-traded funds.
MILLING-STANLEY: It has been very, very important. It made gold
available as an accessible investment to a whole new universe of investors
who hadn’t considered gold any way at all previously.
MILLER: So what would it take for platinum to regain its edge over
gold? One possibility is a disruption in supplies. Another is a big
surge in vehicle production. Erika Miller, NIGHTLY BUSIINESS REPORT, New