There are more than a handful of things that can be used as leading indicators for the Gold price but Platinum to Gold Ratio has a brief but clear history as a leading indicator for Gold. The platinum to gold ratio tells us the relationship between the platinum price and the gold price. In simple terms, this means how many ounces of gold it would take to buy an ounce of platinum. It is a simple ratio to understand; when it is above 1, gold is cheaper than platinum.
Platinum outperformed and led Gold higher immediately after the two most recent major lows: 1985 and 1999-2001.
We also want to note the 1966-1968 period when Platinum tripled in price. Silver doubled and the Gold price was still fixed. In any event, Platinum’s huge move in the late 1960s was a leading indicator for Gold’s forthcoming surge.
Since the February highs, Platinum has made a higher high while Gold has corrected. Platinum looks like it has a reasonable shot to make a new 52-week high this year while Gold would need to fight through the wall of resistance to make a new 52-week high.
According to BMG Group, a study by Wainright Economics showed that Platinum is the leading indicator of inflation. While Gold and Silver lead by a year, Platinum leads by 16 months.
Whatever the reason, history is clear. Around major bottoms in precious metals, Platinum tends to outperform and lead Gold. Since February Platinum has strongly outperformed Gold while registering an important positive divergence.
We will certainly keep abreast of the other leading indicators such as the relative performance of the miners, Fed policy, a steepening yield curve, and precious metals performance against the stock market. We will also keep an eye on Platinum as continued outperformance would be a strong bullish signal for Gold for 2020 and beyond.
The weeks and months ahead should continue to be an especially opportune time to position yourself in this sector. Junior Gold mining companies have received great attention from retail investors and fund managers since late 2018. The stocks I have been watching have more than doubled in the last few months, e.g. RNC Minerals and Albert Mining, and many others in my watchlist/portfolio. If you like to be the first to be notified about great trading or investment opportunities, subscribe to SST’s FREE mailing list.
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