Gold Bugs Get Little Respect from Platinum


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Gold Bugs Get Little Respect from Platinum

By: Charleston Voice

-- Posted Tuesday, 17 January 2006 | Digg This Article Digg It!

As illustrated previously, we know that the PLAT/GOLD Ratio has turned up - favoring platinum - meaning that you will be able to acquire more gold ozs for your platinum when the ratio turns back down.

Big deal. So what does this mean in terms of the dollar price of gold? There are two graphs below. The top graph plots the Ratio from 2003 to present. The bottom chart shows the ascendancy of both metals with the ratio plots as overlays.

What can we conclude? Nothing beyond that platinum will outperform gold. As gold and platinum move in dollar terms together, whether up or down, we can see the ratio trading channel between 1.80 and 2.10, or so. There does appear to be a dollar price correction correlation at the high end of the ratio, ie, at 2.00 and above. The same correlation does not appear to be prevalent when the ratio is moving up from 1.83 as it is now. We could not see a correction in either metal until the ratio hits the upper ratio boundary! Now, that would mean we have one powerful extension of the bull run before us with platinum leading. Note the RSI indicator at about 40 on the chart to the right. That we'd like to see touch 70.

Although South Africa may give the world +70% of the platinum supply we don't feel comfortable buying into the mines operating in the Bushveld area due to the geo-political situation in the Dark Continent. Contracting with the mines is NUM, a Marxist labor organization dominated by the ANC & SACP. There are few alternatives. Australia has some as does Canada. In the US, I would avoid Stillwater. I owned that one several years ago, made money, but shortly thereafter SWC got snagged with some corporate irregularity. I own some of South African mine ANO which has already shown some life. But, whadya gonna do beyond hoping NUM doesn't call a strike? Beyond that, or buying the platinum coins, I see little opportunities here for us. The PLAT/GOLD Ratio will, I guess for the most part, show us gold bugs little respect - just like oil!

- - CV

-- Posted Tuesday, 17 January 2006 | Digg This Article

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