After weeks of strong signals that gold was ready for a surge upwards, it finally broke through several levels of resistance yesterday. In a very short period of time, gold moved from $955/oz to $975/oz and has already climbed to $978.30/oz this morning. Uncertain equity markets, a weak dollar and the state of the markets in general saw investors buy gold. It would appear that some investors’ patience regarding reports of recovery in the market has worn thin and they have retreated into the safe haven, financial insurance and currency hedging attributes that gold offers. Financial problems are far from over (informed speculation regarding a very large hedge fund default – Cerberus Capital Management, where investors asked to withdraw $4.77 billion from the firm’s original hedge funds, or 70% of the assets and rumours regarding the Chinese Sovereign wealth fund selling dollars and buying strategic natural resource assets and gold are not helping jittery markets) and $1,000/oz looks guaranteed. Further pushes higher in the autumn months and the rest of the year seem very likely.
Silver has outperformed gold, smashing through $15/oz yesterday, and is already up over 1% this morning to $15.55/oz. Silver usually hangs on gold’s coattails with short term market moves but its recent de-coupling could see silver continue to outperform gold as investors take advantage of the silver price. Furthermore, commentators believe that the gold silver ratio remains very high (980/15.5 = 63) and this augurs well for the long term prospects of silver. The long term historical average is 15:1 and this is because it is estimated that geologically there are some 15 parts of silver in the ground for every one part of gold. It is important to note that silver, unlike gold, besides being a safe haven investment is also heavily used in industry and it is believed that since the dawn of the industrial revolution some 95% of the world’s silver has been used up in industrial applications. Because of gold’s much higher value, it gets recycled and all the gold mined in the world ever is still with us but photography, mirrors and other industrial uses makes silver like oil – when used it is consumed and gone forever.
Platinum group metals
The wage negotiations at Impala seem, in part, to have been successfully negotiated and platinum is trading at $1,239/oz. Over the past 2 days, an average of 500kg of platinum has been trading on the Shanghai Gold Exchange, providing good support. Palladium gained slightly yesterday, moving to $288/oz and rhodium is $1,625/oz.