Technically and fundamentally, what’s the better deal at these price levels? Gold or Platinum?
That is the question on several Twitter threads.
Flat for 20 Years
A Futures Open Interest View
Can Platinum Catch Gold?
Just Imagine
Bullish Declining Wedge or Descending Triangle?
I fail to see any reasonable way to make a declining wedge of of this.
Instead, I see a huge descending triangle whose expectation is to break down. And it did break down spectacularly after a nice headfake breakout. The final plunge went to 562.
But what do we make of the second triangle? Is that another descending triangle or is it a symmetrical triangle?
A symmetrical triangle is a continuation pattern. But a continuation of what? Of the long downtrend or rebound from the low?
What about fundamentals? This one is easy.
Platinum Fundamentals
- Catalytic converters: The primary use of platinum is as a catalyst in catalytic converters for cars. This is the largest single use of platinum, making up a significant portion of the total platinum demand. This accounts for about 50% of demand each year.
- Jewelry: Another major use of platinum is in fine jewelry due to its durability, resistance to tarnish, and attractive appearance.
- Medical applications: Platinum is also used in some medical devices like pacemakers and surgical instruments due to its biocompatibility.
The above answer was generated by AI, but that sounds right. And it is one huge oops for hopefully obvious reasons.
50 percent of the demand for platinum is in a declining industry. In jewelry, people prefer gold.
And in a recession, which I believe is here, what is the demand for jewelry?
Gold Fundamentals
J.P. Morgan: “Gold is money, nothing else.”
Gold has industrial uses, but those uses are trivial.
You can claim gold is not money, but central banks hold gold, not silver, not platinum. Why?
Gold’s Strongest Move In a Year Was When the Dollar Was Rising
Gold vs the US Dollar
Regarding technical patterns, the top half of the above chart is the best long-term cup-and-handle formation in history. It broke in the expected way, and that is up.
Gold is now at an all time high of 2,650.
On April 11, 2024, I noted Gold’s Strongest Move In a Year Was When the Dollar Was Rising
Gold and the US dollar are not as inversely correlated as widely believed. Sometimes gold and the dollar move strongly in the same direction.
For discussion of misconceptions about gold vs the dollar, please click on the above link.
When Does Gold Do Best?
In general, gold is a poor inflation hedge. The best example is gold fell from$850 to $250 per ounce with inflation every step of the way.
In the mid-to-late 1990s, everyone thought “The Maestro”, Alan Greenspan, had everything under control. In such periods, gold is among the worst assets to hold.
Gold is best viewed not as a hedge against inflation but a hedge against credit stress, stagflation, and faith in central banks.
Dear Jerome Powell, Is Everything Under Control?
On May 17, 2024, I asked Dear Jerome Powell, Is Everything Under Control?
If you think the Fed is going to get things under control, demand for catalytic converters is about to take off, and a recession won’t hinder demand for jewelry, then platinum is a great bet.
But if you think that the Fed does not have things under control, and won’t get them under control, even in a recession, then gold is a better bet.