Gold vs. platinum: Which metal should investors own in Q4?

Investing.com -- UBS told clients in a note Thursday that it prefers gold over platinum heading into the fourth quarter, pointing to weaker fundamentals for the white metal after a second straight quarterly surplus.

Strategist Giovanni Staunovo said the platinum market was oversupplied again in the second quarter.

"Weak investment and jewelry demand suggests that the platinum market will remain oversupplied this year," he wrote, adding: "Given platinum's weaker fundamentals, we currently prefer exposure to gold over the white metal."

The World Platinum Investment Council estimated a surplus of 244,000 ounces in the second quarter, equivalent to 15% of global demand, and revised the first-quarter surplus higher to 304,000 ounces.

For the full year, it now sees a surplus of 265,000 ounces, a sharp swing from a previously forecast deficit, primarily on weaker investment demand.

Staunovo said the surplus reflects recovering mine supply in South Africa and Zimbabwe after last year's flooding, higher scrap volumes and softer demand.

Chinese jewelry demand weakened as end-consumer appetite proved limited, while autocatalyst demand fell as rising electric-vehicle adoption cut production of combustion-engine cars.

With platinum again more expensive than palladium, Staunovo said new vehicle models may revert to palladium-based catalysts. Bar and coin purchases fell and exchange-traded funds saw outflows, with industrial demand from the glass sector the only bright spot.

Still, the strategist noted that rising gold prices have lent some support to platinum given their strong correlation. UBS's forecasts point to modest downside from current levels in the near term, followed by broadly sideways prices over the next 12 months.

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