Platinum-Gold Ratio Ready to Revisit 2001 Low: Chart of the Day

By Rachel Graham

Aug. 22 (Bloomberg) -- Platinum's price relative to gold is showing a pattern not seen since the economic slowdown in 2001, suggesting the cost of the silver-colored metal may have further to drop, according to Fortis Bank SA/NV and VM Group.

The CHART OF THE DAY shows the ratio between the two metals has dropped to 1.74 from 2.38 in May as platinum prices plunged 37 percent from the record $2,301.50 an ounce reached March 4. The ratio reached a low of 1.43 in 2001.

Gold tends to be favored by investors as a haven when growth slows, while platinum is reliant on economic expansion, Fortis and VM Group said in a report published Aug. 20. About half of demand comes from carmakers, who use the metal in autocatalysts, according to Johnson Matthey Plc. The figure takes into account recycling from used autocatalysts.

A ratio of 1.5 and gold at $800 an ounce would suggest platinum will drop to $1,200, according to the report. That would cut costs for carmakers. Such a price isn't ``obviously absurd'' because that's what people were paying a year ago, Fortis and VM Group said. The World Bank expects global growth to slow to 2.7 percent this year, from 3.7 percent in 2007.

Gold traded at $833.30 an ounce as of 5:44 p.m. in London yesterday, while platinum was at $1,449.50 an ounce.

To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net