My firm suggests holding three precious metals (in a physical form) as long-term investments in a “default” precious metals portfolio – gold, silver, and platinum. There are, of course, other viable options, such as palladium, depending on one’s preferences and needs, but these three will suit virtually any precious metals investor.
Gold is -- and has always been -- the most popular precious metal. It usually attracts the most attention both from investors and the general public and could be viewed as the safest bet. What's more, recent bottoms visible in the long-term charts suggest that a huge rally in the gold market is likely
some time this year. However, the other two precious metals are tempting as well, as many factors suggest that they may outperform the yellow metal in the coming months and years.
As far as silver is concerned, we would like to mention two important arguments. Firstly, when silver reached its all-time high in April 2011, it merely reached the level of its 1980 high (only in nominal terms, as in real terms this high was much, much lower) whereas gold’s all-time high from 2011 was more than double the one from 1980 (again, in nominal terms). This itself shows its great potential relative to gold. The second argument is more technical in nature, but very much in tune with the above one and consists of various price projections for the white metal
that we featured two weeks ago.
A detailed explanation of why platinum is likely to outperform gold
can be found in one of our recent essays, but the most important factor here seem to be the fact that platinum has historically been the more expensive metal, with last year being an exception and that just recently platinum’s price has exceeded gold’s. And when we add to that the supply problems, which are the result of strikes in South Africa (which produces 75% of world platinum supply), the outlook for platinum does indeed seem encouraging.
To see how the above arguments fit into technical picture, let us jump straight into the world of charts. We will begin with silver’s long-term one (charts courtesy of http://stockcharts.com
Click to enlarge
Today we begin with the long-term chart in order to emphasize the importance of looking at the big picture, which should always take precedence over short-term charts. In silver’s long-term chart, we see that prices tried to break down below the long-term support line but failed. They are now back above this line, and, after rallying, touched the resistance-support line once again. We clearly have a bullish situation with bullish implications for the long term.
Now, let us move on to the platinum market. Here, we will use platinum to gold ratio, as this chart seems to exert the most influence on the price of platinum currently.
Click to enlarge
In this chart, we see the ratio is now above 1.0, and the breakout is being verified (successfully so far). Platinum is now more expensive than gold. The ratio broke above 1.0, moved back to it, and has moved slightly higher again. We could see more consolidation here, but the long-term implications remain unchanged. Platinum is expected to outperform gold in the months ahead, and the ratio is therefore expected to move higher as well.
A major bottom was seen at the end of 2011 (close to the powerful long-term turning point) and in early 2012. A breakout has now been seen above the long-term declining resistance line in this ratio, and it seems that a big comeback for platinum to much higher prices is likely. This will pay off big time for those invested in platinum for the long run.
, the technical implications and the the fundamental implications are bullish for both white metals. Both of them are positively correlated with the general stock market in the long run because of their industrial uses. With stocks moving higher, it is this part of the precious metals sector that may move the most in the coming months. While we continue to believe that diversification is the way to go, it seems that platinum and silver will outperform gold in the medium term.
Thank you for reading. Have a great and profitable week!
For the full version of this essay and more, visit Sunshine Profits' website.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.