Another Reason a Platinum Boom Is Coming

It's true – and crazy – that gold trades for about $1,500 today, and platinum sells for less than $1,000 an ounce.

We've never seen platinum trade for such an extreme discount relative to gold, as I explained last week.

This has created a huge opportunity. For platinum to trade at its historic average, it would need to rocket above $2,000 per ounce – for a gain of more than 100% (with no move in the price of gold).

Platinum is simply dirt-cheap compared with gold. But the story gets even crazier...

You see, most investors think about platinum all wrong. But by looking at the metal the right way, we'll see that there's another reason why a platinum boom is nearly certain.

Let me explain...

You might not realize it, but platinum isn't exactly a precious metal. And it's not fair to just compare it with gold.

Gold might be the champion of precious metals. But it's also boring.

The metal has very few uses. You can make it into jewelry or dental fillings. It has limited uses in electronics too, since it's a great conductor. But that's about it.

The majority of gold's demand comes from investors. Platinum is a different story. Not only is it rarer than gold... it actually gets used.

Platinum has played an important role in industry for a long time. Specifically, it's used in cars for catalytic converters. Its role there is to help capture unburnt – and dangerous – hydrocarbons. In other words, if you want a cleaner car, truck, or boat, you need platinum.

These industrial uses make platinum a bit of a "tweener"... It's part precious metal and part typical commodity.

To see what I mean, just take a look at the metal compared with a major commodity index...

You can see that what happens in the commodity market is important to platinum. When commodities in general fall, platinum struggles.

When you back-test the idea that platinum is half precious metal and half commodity, the results are surprising. The relationship is an excellent match over decades.

Even more important, looking at platinum this way shows us that the metal isn't just dirt-cheap compared with gold. It's dirt-cheap – period.

Take a look...

Here we see platinum compared with an index that's simply 50% gold and 50% commodities. As you'll notice, this index has tracked the price of platinum incredibly well – until recently.

At the far right of the chart, you can see that platinum has fallen below fair value by this measure. The price of platinum is not keeping pace with the index that has historically described it best.

We know that platinum isn't only cheap relative to gold. It's also cheap compared with this 50-50 gold-commodities index. And that's huge.

It tells us platinum is a fantastic deal right now... no matter how you look at it.

So if you're excited about gold, that's fine. I expect the metal will do well in the coming years. But don't miss out on platinum right now.

Thanks to today's extreme undervaluation, platinum's upside is even better than gold's.

Good investing,


Further Reading

Catch up on Steve's breakdown of the crazy extreme in platinum right here: Gold Is NOT the Best Bet in Precious Metals.

Chris Igou recently told DailyWealth readers about another under-the-radar corner of the market that is set for major outperformance ahead. Get the details right here.

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Like platinum, after reaching dirt-cheap levels compared with gold, silver is likely to soar. And one miner is poised to benefit as silver prices move higher from here...

Market Notes


Today's company gives us more proof that America needs new homes...

Steve has been tracking the bull market in housing closely this year. We have a strong economy with low unemployment... low mortgage rates... and limited homes for sale. That means homebuilders are enjoying more demand than supply. Just take a look at today's company, which is one of the nation's largest homebuilders...

Lennar (LEN) is an $18 billion company that's been building single-family homes for 65 years. In the most recent quarter, it delivered more than 13,500 homes – up 7% year over year – at an average sale price of $394,000 each. And Lennar has a backlog of nearly 19,000 more homes, averaging $402,000 apiece, that are still in progress. It's another sign business is booming in the U.S. housing market...

LEN shares have jumped about 30% over the past year, reaching a new 52-week high. As the bull market in housing continues, Lennar will continue to enjoy strong demand for its homes...