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REUTERS, London

Gold is having a golden moment as investors fret about runaway prices and the stability of the US dollar. Adjusted for inflation, gold has risen above its previous peak in early 1980, after which its value declined in nominal terms for nearly two decades. The precious metal now trades at more than three standard deviations above its long-term trend. Although gold has retained its purchasing power over several millennia, it has proven a relatively poor hedge against inflation over the shorter term. After a 25 percent increase this year, it has never looked more expensive, both in real terms and relative to other commodities.

“The real price of gold,” writes, Campbell Harvey of Research Affiliates, “resembles a price-earnings ratio for equities. Very high P/Es are often followed by low expected returns. Gold’s historical record suggests a similar pattern.” Since 1975, investors who acquired gold at elevated prices lost money over the following decade. Conversely, buying gold when it was relatively cheap delivered positive inflation-adjusted returns.

Today its price is far out of line with several other commodities. Over the past half-century an ounce of gold has, on average, cost 21 times the price of a barrel of oil. Today, the gold/oil ratio is above 50 times – its highest-ever level apart from a brief moment in 2020. Gold also looks expensive relative to silver. Since 1975, on average, you could exchange 60 ounces of silver for an ounce of gold. Today, gold is worth around 100 times more than its cheaper cousin.

There’s another precious metal that looks even less expensive. Platinum may not have the allure of gold but is much harder to find. Global production is mostly concentrated in deep mines located in a small region of southern Africa. Platinum has been on a roller-coaster in recent years. In the first decade of the century, the metal was caught up in the mining supercycle when it boomed and then crashed. Mine production was interrupted during the pandemic after which platinum climbed above $1,200 an ounce in the spring of 2021. Since then, it’s fallen below $1,000. In real terms, platinum currently trades roughly 25 percent below its 50-year average.

Since 1900, the price of platinum has proved stable relative to gold, according to Bryan Taylor, chief economist at Finaeon (formerly Global Financial Data). Over the past 50 years, the ratio of gold to platinum has on average been about par. Since 2015, however, gold has pushed ahead and now trades at three times the price of platinum. Relative to gold, platinum has never been so cheap.

The significance of these comparisons is a matter of judgment. After all, gold is considered by many to be an alternative to unstable paper currencies. Although silver and platinum are officially designated monetary metals they lack the strong brand of their yellow rival.

Successive US presidents have threatened to undermine the current international monetary system dominated by the US dollar. After the United States and its allies froze Russia’s foreign exchange reserves in 2022, China and other central banks stepped up their purchases of gold. On several earlier occasions when international monetary regimes collapsed, gold underwent a paradigm shift.