Platinum: An Introduction

Platinum: the Cadillac of precious metals, or is it?

For years platinum was consistently worth more than gold, ounce for ounce of pure metal. The “gold/platinum ratio” was always in favour of platinum and seemed like a natural law, until a couple of years ago. When the world was suffering the worst of the Great Recession after the financial crisis, gold behaved like a safe haven investment, rising steadily as people and institutions bought gold bars as a hedge against currency devaluation. Platinum, on the other hand, began acting more like an industrial metal. After all, most of it gets used in the automotive industry to make catalytic convertors, and we all know what happened to the automotive industry!

So for a couple of years now the gold/platinum ratio has been upside down with platinum actually worth less than gold. In very recent months platinum has recovered somewhat because of labour problems and mine closures in South Africa, where most of the world’s platinum comes from, restricting supply, otherwise the price of platinum would be even lower!

Can you get a fair price for old platinum?

People are often surprised that old gold dealers are not particularly excited about platinum jewellery. At GoldSmart we do buy platinum, but there are some good reasons why many dealers will not, or offer a low price for it. The reasons break down into two basic problems: time and money.

The first thing to understand about platinum jewellery is that the “intrinsic” value really is greater than most gold jewellery for two reasons: Platinum itself, gram per gram, costs about the same as gold but the alloys used to make platinum jewellery are richer. Most gold alloys range from 10 karat (about 40% gold) to 18 karat (75% gold) while the platinum alloy used to make jewellery is typically 95% platinum.

Having said that, dealers have a problem with platinum jewellery because it is relatively rare, but the quantities required to begin the refining process are quite large. So when a dealer buys your platinum ring today he will literally have to keep it for weeks or months while he accumulates more platinum from other sellers to reach the minimum required to start a platinum refining melt. During that time the money spent to buy platinum is tied up in inventory and the dealer is exposed to the market. What if the price of platinum drops? He could lose any profit he might have gained just in the market loss.

The second problem is that the refining process itself is very long. A dealer can recover the cash value of a gold lot in a short time: from a few hours to a few days. With a platinum lot the dealer will wait about 24 weeks to be paid. More time to tie up money and be at risk of market loss.

So don’t be too surprised if dealers are resistant to buying platinum, but you can sell it and you can get a fair price. Check our prices for platinum and check other dealers to get the best deal.