Mike
02-10-2013, 12:41 PM
There is speculation that the gold market is being manipulated. For example Germany has requested half of the gold they have in storage in the US to be shipped to Germany only be told that they can't have it until 2022. The US has loaned the gold out to be sold on the market (perhaps to depress prices). With central banks acting this way it is difficult for me to develop the kind of conviction that I need to trade gold right now, so I have started to look for an alternative.
I looked at the Platinum market this weekend. Compared to gold platinum is trading at a multi-decade cheap price. From 2000-2008 Platinum usually traded at a 50%-120% premimum to gold. Today it is trading at par. To illustrate, the chart below shows the continuous platinum futures contract divided by the continuous gold futures contract. Values above 0% mean platinum is (was) trading at a premium to gold.
17283
Some fundamental factors are at play. Platinum (or Paladium) is used for polution reduction such as in every automobile catalytic converter sold in the US. For catalytic converters either metal can be used. All platinum mines contain paladium, so they can be though as being somewhat interchangeable when talking about either metal. With the recovery of the auto market platinum demand should increase. Platinum is used as an electode in many other devices as well as in jewlery. As China is reinventing the defintion of smog, they will have to resort to strong measures to reduce air polution just at a time they are increasing automobile ownership. So my belief is that there is a demand building for the metal. Platinum is mined in Russia, South Africa, Canada and South America. South African mines are in bad shape and the workers have been striking (and being shot when they do). South American mines (Columbia) are not in good shape either because of corrupt governments and no investment. There is one North American platinum (and paladium) mine in Montana that is in good shape (Stillwater Mining symbol SWC). They had one of their properties in South America taken over by the government so they have had to write off a lot of losses recently. Hopefully a one-time event.
So with the governments running their money printing presses platinum might be an interesting alternative precisous metal to consider looking forward. The market will unlikely come under manipulation as it is too important to manufacturing. Supply is limited. There are multiple ETFs that focus on this market: PPLT, PTM, PGM, LPLT, PTD and IPLT with the first one being the most liquid. Four weeks ago Platinum gave us a weekly Coppock buy signal. PPLT broke out of a cup and handle base three days ago and has pulled back a bit. The chart doesn't look great but there is obvious large volume accumulation occuring inside the base. The float has turned over four times since any overhead supply comes into the picture (July 2011). I looked at LEV and don't find anything compelling there so possibly we need to see a pull back.
I looked at the Platinum market this weekend. Compared to gold platinum is trading at a multi-decade cheap price. From 2000-2008 Platinum usually traded at a 50%-120% premimum to gold. Today it is trading at par. To illustrate, the chart below shows the continuous platinum futures contract divided by the continuous gold futures contract. Values above 0% mean platinum is (was) trading at a premium to gold.
17283
Some fundamental factors are at play. Platinum (or Paladium) is used for polution reduction such as in every automobile catalytic converter sold in the US. For catalytic converters either metal can be used. All platinum mines contain paladium, so they can be though as being somewhat interchangeable when talking about either metal. With the recovery of the auto market platinum demand should increase. Platinum is used as an electode in many other devices as well as in jewlery. As China is reinventing the defintion of smog, they will have to resort to strong measures to reduce air polution just at a time they are increasing automobile ownership. So my belief is that there is a demand building for the metal. Platinum is mined in Russia, South Africa, Canada and South America. South African mines are in bad shape and the workers have been striking (and being shot when they do). South American mines (Columbia) are not in good shape either because of corrupt governments and no investment. There is one North American platinum (and paladium) mine in Montana that is in good shape (Stillwater Mining symbol SWC). They had one of their properties in South America taken over by the government so they have had to write off a lot of losses recently. Hopefully a one-time event.
So with the governments running their money printing presses platinum might be an interesting alternative precisous metal to consider looking forward. The market will unlikely come under manipulation as it is too important to manufacturing. Supply is limited. There are multiple ETFs that focus on this market: PPLT, PTM, PGM, LPLT, PTD and IPLT with the first one being the most liquid. Four weeks ago Platinum gave us a weekly Coppock buy signal. PPLT broke out of a cup and handle base three days ago and has pulled back a bit. The chart doesn't look great but there is obvious large volume accumulation occuring inside the base. The float has turned over four times since any overhead supply comes into the picture (July 2011). I looked at LEV and don't find anything compelling there so possibly we need to see a pull back.