Platinum Price Recaptures the Lead From Gold

Cautious words from the Federal Reserve encouraged another sell-off in gold and silver yesterday, with the gold price falling below an important buying support level at $1,680. The silver price has also fallen, and as of 1200GMT is trading below $33. Settlement below $33 could prolong silver bulls short term problems – with $32.50 a particularly important support level, given that this price consistently marked a point of selling resistance in silver until the mini-breakout last month.

Yesterday’s Federal Open Market Committee statement gave no indication of more imminent stimulus measures from the Fed, and also noted that the economy was “expanding moderately”, and that “labor market conditions have improved further”, but that unemployment “remains elevated”. As ever – and in common with central banks the world over – it views the current spike in crude oil and petrol prices as temporary, and thinks that “longer term inflation expectations remain stable.” The bond market appears to be telling a rather different story on this front, however, with another sell-off in US Treasuries and the long bond now close to breaching an important technical support level on its monthly price chart. Perhaps the US Treasury should take a leaf out of the British government’s book and start issuing 100-year bonds pronto. Rates aren’t going stay at the current pitifully low levels forever.

The mildly optimistic sounds emanating from the Fed, combined with news that two large US banks have “passed” the Fed’s bank stress test, and the biggest rise in US retail sales in five months was all goose for the gander as far as equity bulls were concerned, with the S&P 500 spiking to over 1378 intraday – its highest level since June 2008. The dollar also edged slightly higher, and is now back over 80 on the USDX. All is sweetness and light again as far as Wall Street is concerned. This is partly why the gold price is struggling at the moment, and why the platinum price has moved back above that of gold. Gold gains in value relative to platinum as a result of bearishness and falling confidence; platinum gains relative to gold because of bullishness and rising confidence.

As ever, Diapason Commodities’ Sean Corrigan sums up the situation nicely in a new article at the Cobden Centre Blog:

“Our argument, repeated several times since the end of last year was that players have begun to rely on the rapidly repeated stop-go cycle of highly bullish episodes of central bank Vollgas interspersed with periods in idle of the sort which, though comparatively mild in the degree of restraint they offer, cannot be abided by a pricing structure arguably bereft of a firm, fundamental underpinning.”