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Bet On Gold-Platinum Parity

Mar. 08, 2021 8:57 AM ETGLD, PPLT10 Comments
Damir Tokic profile picture
Damir Tokic


  • Currently, gold is trading at 1.5 times the price of platinum.
  • The gold/platinum ratio is likely to fall back to 1: the price parity.
  • Long platinum-short gold, or long platinum outright without the short gold hedge.


The bet on gold-platinum parity might be one of the top trades now, based on risk-return profile. Historically, the price of platinum (PPLT) has been higher than price of gold (GLD). However, recently gold has been trading at a very high premium to platinum. This is a temporary disequilibrium and the price of gold and platinum will likely reach parity.

Here is a long-term chart of gold (in blue) and platinum (in black):

Currently, gold is trading at $1700/ounce while platinum is trading at $1130/ounce - which is highly unusually based on historical data. The next chart shows the gold/platinum ratio since 1960s.

Based on the chart above, gold has been trading at discount to platinum most of the time, and the parity line of 1 served as a major resistance from early 1970s until 2014. The trend of rising gold/platinum ratio broke the parity line and accelerated in 2015, and reached the peak in March of 2020 during the Covid19-related lockdown, when the price of gold was 2.2 times higher than price of platinum. Since the announcement of an effective Covid19 vaccine in November of 2020, the gold/platinum ratio plummeted - and yet the price of gold is still 1.5 times the price of platinum. It is likely that the trend of falling gold/platinum ratio will continue until it reaches the parity line.

Why is the gold-platinum ratio in disequilibrium?

All commodities are affected by 1) common macro factors and 2) commodity-specific supply/demand dynamics.

Common factors that affect commodities as an asset class include the US Dollar cycle and inflation expectations. For example, commodities tend to appreciate as the US Dollar weakens and inflation expectations increase. However, the inter-commodity spreads should remain relatively stable when commodities respond specifically to common macro factors.

On the other hand, each commodity also

This article was written by

Damir Tokic profile picture
Global-macro research. Proprietary trader. Holding a valid Series 3 license as a Commodity Trading Adviser, member of National Futures Association. Professor of Finance. Editor-in-Chief Journal of Corporate Accounting and Finance.

Analyst’s Disclosure: I am/we are long XPTUSD:CUR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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