A note about investing in precious metals...

Taken from the New York Times "In Motorola Split, New Chapter" by Robert Cyran and Robert Cole (haha...cute) :

An Odd Couple

Gold and platinum make an odd couple. Forget that these are two of the world’s most precious metals. Forget also that the prices of gold and platinum have chased each other up the charts since the end of 2008. From an investment perspective, platinum and gold may as well be chalk and cheese.

The rising gold price reflects deep unease about the world’s financial system. For doomsayers, gold is the only reliable store of wealth as paper and electronic currencies make their weary way to debasement. Currency and trade wars, inflation, euro zone debt defaults: gold investors have more than enough grist for their mills.

While gold bugs think the world is hellish, platinum buyers believe in more heavenly outcomes. Demand for the metal rests on the prospects for industrial production, and particularly demand for platinum-hungry catalytic converters.

So despite the stark differences in investment outlook, both metals have been rising in price over the last couple of years. But the ratio between the two tells a different story. When economic prospects are reasonably good, the platinum price is high relative to gold. When platinum fades in comparison to gold, bears have the upper hand.

In early 2008, an ounce of platinum fetched more than twice the price of an ounce of gold. Over the next 12 months, gold rose and platinum crashed; in late 2008, the price of both metals was briefly the same. As both gold and platinum have risen through 2009 and 2010, the ratio has waxed and waned. In April this year, it touched 1.5. After the recent worries about money-printing and euro zone debt woes, it has fallen to 1.2.

Of course, the relative strength of two precious metals is not a perfect indicator of the world’s financial and economic health. There are other factors that affect industrial production. Gold hardly offers perfect insight, either. But as a quick and simple barometer of sentiment, the battle between platinum-plated optimists and gold-hoarding pessimists tells a compelling story.