“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput






Tuesday, March 13, 2012

Platinum regains its premium to Gold

For the last six months or so, platinum has been trading at a discount to gold. This is a rare occurrence as one can see from a glance at the monthly chart going back to 1990. Only in 1991 did platinum trade at a discount to the price of gold. Late last year and early into this year, an ounce of the white metal was over $200 cheaper than an ounce of gold!



This came about due to fears that the global economy would slow down as European sovereign debt woes sent out a type of contagion rippling across the planet. Auto sales especially would be hit and since platinum is heavily used in catalytic converters, ideas spread that demand for the metal would falter.

If you notice however, platinum has been steadily gaining ground against gold as investors began anticipating Central Bank liquidity injections to deal with the pesky debt issues plaguing Europe, not to mention an ultra low interest rate environment which was intended to spur both borrowing and lending and by consequence, growth.

It also did not hurt that a major strike in an important platinum mine popped up cutting off supply from the world market.

This is another one of those combination indicators that can be used to gauge investor sentiment towards the global economy in general. As long as traders feel that there is little to fear as impediements to growth, they will bid this spread higher in favor of platinum.

6 comments:

  1. Somebody mentioned the historical ratio was .74, which would mean still roughly 25% upside in platinum over gold.

    Add the fact the cartel has their dirty hands in gold every day, and the miner strike - makes this one a no brainer.

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  2. Lets face facts. Consumer stocks are trading like tech stocks in 1999. Gold stocks are trading like bank stocks in 2008.

    Anybody who went long XRT and shorted GDX has made once in a lifetime gains in just 6 months.

    Same thing goes for the infamous "Ratio Traders".

    Now that bonds are cracking, what happens when all that money starts chasing stocks? Will the Dow make new highs?

    If so, what happens to the Dow to Gold ratio?

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  3. I like your two questions Mark! - three questions.
    It looks to me that there is permanent damage to the bond market bubble. So that money will chase something else - stocks seem to be a first choice.
    So what happens to the Dow to Gold ratio? I am more familiar with the SP to Gold ratio, and I can tell you that I NEVER imagined that it could trade again above .83 as it is now doing.
    This a is splendid piece of "Rope a Dope" that THEY are giving us.

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  4. Dan,
    Platinum does look like it's under the radar but steadily moving up.
    What's the safest play for a long term hold for an IRA?

    Thanks,
    Tom

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  5. Platinum will have a bright future. It will definitely have a better performance in the next few months.

    cash for platinum

    ReplyDelete
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    ReplyDelete