Are platinum, silver a better investment option than gold post Brexit?

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The Brexit referendum result has pushed gold to a two-year high. Gold investors feel that central bankers, in order to mitigate the impact of Brexit, will announce stimulus and keep their currencies relatively weak. “The global currency war is still going on. So, gold may continue to rally after a short-term correction, consolidation,” says Lakshmi Iyer, Head, Fixed Income and Product, Kotak Mahindra Mutual Fund. Due to the renewed investor interest in gold, the holdings in global gold exchange traded funds have jumped to their highest levels since 2013. The prices of other bullions, platinum and silver, however, have not moved in the same way, and their discount to gold has widened.

Platinum, which used to trade at a premium to gold, has fallen below the yellow metal. Consumers, who avoided buying platinum jewellery because of its higher prices, can consider buying it now. However, they need to be cautious about platinum’s price on the day of purchase. Getting the right price can be a problem. “Since the domestic demand for platinum is only 2%-3%, not much platinum trading happens in India. While we get the domestic price of gold and silver every 10 minutes, getting that for platinum is difficult,” says Hasmukh Bafna, President, Gold Chains & Jewellery Wholesalers Welfare Association. Platinum also has poor resale value as only a limited number of shops buy it back. Besides, compared with gold jewellery, making charges, close to Rs 500 per gram, are much higher for platinum jewellery.

Are platinum, silver a better investment option than gold post Brexit? Buyers also need to be cautious when it comes to the purity of the metal and what it is mixed with. “Since platinum prices are low now, most consumers are opting for 95% purity,” says Manish Jain, former chairman, All India Gems & Jewellery Trade Federation. When you go for 95% purity, you need to be careful about the remaining 5% that is added to the jewellery. Insist on cobalt or ruthenium as they help the metal maintain its polish. Metals like iridium, though cheaper, can lead to the jewellery losing its lustre after some time.

Silver shining
Experts say that silver will outperform gold from current levels. The silver-gold ratio—1 troy ounce (31.10 gram) silver / 1 troy ounce gold—is now close to its lowest levels seen in the past 20 years. Once things stabilise, this anomaly is likely to get corrected. “Silver has not participated in the recent rally. It is usual for investors to shift to silver after a significant rally in gold and, because of this, silver is expected to do better than gold in the medium term,” says C.P. Krishnan, Whole Time Director, Geofin Comtrade. Though lack of industrial demand is depressing silver prices now, it is a short-term phenomenon. However, experts feel that you need to wait for a correction in the bullion market to buy silver.
“Silver is expected to correct to Rs 38,000 per kg before rallying to Rs 48,000-50,000 by end of December. So place a buy order in Rs 38,000 – Rs 38,500 range,” says Ram Pitre, a commodity and currency market expert.