Despite the sharp rise in gold prices in recent years, platinum continues to slump. Consecutive years of global supply surpluses knocked down platinum prices from an all-time high of $2,276 to irrationally low levels.
For roughly five months now, platinum has been cheaper than gold. While this is by no means unprecedented, it is certainly far from normal. Gold hasn’t been worth more than platinum since December 2008 (prior to that, not since December 1996)–and for good reason. 80% of all the world’s platinum comes from just one country–South Africa–and it’s more costly and difficult to mine there than perhaps anywhere else.
South Africa’s 6% inflation and rising wages increased platinum miners’ average cash costs to over $900/oz. last year, compared to $700/oz. on average for global gold producers. That means gold presently sells for almost 2.5 times its average cash costs, while platinum
is worth just 1.85 times its mining cost, suggesting platinum is undervalued relative to gold.
