Gold/Platinum Ratio & the Coming Depression

During the gold bull market of the 1970s, the Gold/Platinum Ratio was in a significant uptrend. It went from about 0.2 to 1.4 over a 12-year period. That is a seven-fold increase. At the start of the current gold bull market (2001), the Gold/Platinum Ratio was just a bit higher than 0.4. If the ratio was to emulate its performance during the last gold bull market, it could reach 2.8 (that is gold being 2.8 times the value of platinum).

Similar conditions to that of the ‘70s, which propelled gold and other commodities higher during the ‘70s, are present now. However, this time, due to the current higher debt levels relative to GDP, compared to that of the ‘70s, conditions are more in favor of gold than commodities like platinum (that are more reliant on economic activity).

In the chart below, you can see that debt levels relative to GDP were much lower during the Great Depression, as well as what it is currently.

 

US Debt to GDP Ratio

What this is telling me, is that we are going to have conditions that are more like the Great Depression, for the remaining part of this gold bull market. The economic decline, which will mainly come as a result of the debt bubble bursting, will negatively affect a commodity like platinum, when compared with gold.

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