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Gold has been trouncing a lot of other investments in its record run, and now we can add another to the list: platinum, its usually richer cousin.

Last week, the price per ounce of gold briefly surpassed that of platinum – something that has only happened once before in the past 14 years. Prior to 1997, the two moved more or less in tandem, with platinum tending to hold a small premium over gold. But since then, platinum has routinely been the much higher priced of the two precious metals – until this year, when gold has thrived while platinum has stagnated.

To some, that might suggest that platinum has been overlooked in the gold frenzy, and thus may be poised to rally to its traditional premium over gold. But Ross Strachan, commodities economist at Capital Economics, thinks gold is set to firmly establish the upper hand for at least the next couple of years.

It's the economy, stupid

The reason, Mr. Strachan said in a research note this week, boils down to the very different drivers of demand. Gold is chiefly a financial instrument, used as a shelter from economic and currency instability and, increasingly, as an investment. Platinum is, for the most part, an industrial metal; only 8 per cent of demand in 2010 was for investment purposes.

Mr. Strachan said gold will continue to feed on what sent it above $1,800 (U.S.) an ounce this week: worries over U.S. and European government debts and the uncertain future of the euro zone. He has predicted that bullion will reach $2,500 by 2013.

On the other hand, platinum will struggle under the weight of a "gloomy" global economy, he said. The single largest source of demand for the metal is the European auto sector, which could be in for a rough few years as the debt-riddled continent tries to get back on its feet. He predicted that platinum is headed to $1,500 in 2012-13, from more than $1,800 now.

Will investors discover platinum?

But platinum's relatively low investment demand could actually be a boon to its performance versus gold in the next few years, rather than a hindrance.

The World Gold Council reports that investment accounted for 38 per cent of all gold demand in 2010, up from less than 10 per cent in 2001. Much of that growth has been due to the surge in popularity of bullion-based exchange-traded funds.

One could argue that the gold ETF market has become pretty saturated. Even if you think there is still room for gold ETFs to proliferate, it's safe to say that there's a lot less growth potential there than in platinum.

Some observers believe investment in gold ETFs may actually decline in the coming years, once gold's record-setting rally comes to an end and people move out of gold in search of other opportunities. The still relatively untapped platinum ETF market could be fertile ground into which fund providers could expand.

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