Fear Driving Markets, Just Look At Gold's Premium Over Platinum Right Now

Neils Christensen  Wednesday April 19, 2017 12:12

(Kitco News) - Gold’s more than $300 premium over platinum is another example that fear and uncertainty is driving demand in the marketplace, according to the latest report from OptionsXpress.

Mike Zarembski, senior commodity analyst at the brokerage firm, noted that the gold:platinum ratio is trading near the top of its 12-month range, which is a good indication that there is a strong fear sentiment among investors right now.

“One potential way that some traders look for clues as to the strength of the global economy is to compare the performance of Gold versus some of the more industrial of the precious metals, such as Platinum,” he said. “The theory here is that during times of strong global growth, the demand for industrial commodities such as platinum will rise, while a commodity such as Gold, which has taken on the reputation as a ‘safe haven’ asset will see demand lag. Conversely, during times of uncertainty, the demand for Gold should rise versus that for industrial commodities.”

The sentiment has weakened somewhat Wednesday as gold prices have dropped from recent five-month highs. June Comex gold futures last traded at $1,279.30 an ounce, down more than 1% on the day. At the same time, July platinum futures last traded at $968 an ounce, also down more than 1% on the day.

While gold’s near-term failure to break resistance at $1,300 could create further short-term weakness as funds liquidate long gold positions, Zarembski said that he is watching technical momentum.

“It appears that the short-term 20-day MA [moving average] is preparing to cross above the long-term 200-day MA. This cross over should it occur would generally be viewed as a bullish technical signal, which could spur fresh buying by trend following systems traders,” he said.