IBD likes platinum; not gold or silver
And the newspaper gives five reasons why:
- Platinum has outperformed gold and silver in the short-term and over the past year.
- Strong car sales mean higher platinum prices, particularly since 40 percent of mined platinum goes into catalytic converters.
- Mine strikes in South Africa have seriously dampened platinum supplies.
- Mining costs have out-stripped platinum prices for a lot of companies – a fact that will likely lead even more producers to cut their platinum output.
- Growth in China means more platinum jewelry sales.
Say hello to the catalysts that could push gold prices up overnight
Gold prices have fallen slowly and steadily since the end of February, and that’s got some commentators arguing that it could be the beginning of the end for the yellow metal (see our post 3 signs investors are fleeing gold for more). That said, the price of gold is anything if not volatile.
Gold prices are so volatile, in fact, Barclays Capital’s Maneesh Deshpande is telling investors to trade volatility in gold prices rather than the metal itself (per Barron’s). In spite of that, Deshpande and several co-authors of a recent research report from Barclays have identified what they call catalysts for a rapid upswing in gold prices. Among them:
1) A Euro hangover. Should another wave of panic sweep across the Euro-zone, look for investors to pour into gold. The authors of the report do point out that the correlation between problems with the Euro and higher gold prices is tenuous at best. If a country were to be forced out of the Euro-zone or were to go into default, though, we suspect that gold prices could spike significantly.
2) A thumbs up from the Indian government. One of the less visible reasons we’ve seen languishing gold prices is India’s recent tax increase on gold imports. The government doubled import dues from 2 percent to 4 percent. That’s putting strain on the the Indian gold market, and India remains the world’s largest consumer of gold jewelry. Should the government change its mind on the new tax, gold prices could catapult higher. While Barclays feels a repeal of the tax hike is unlikely, they do point out that India’s parliament could consider modifying import rules (via its finance bill) on May 7. Whatever the outcome, gold prices could get volatile in the run-up to the decision.
3) Economic changes in the U.S. Should the economic picture in the U.S. grow cloudy, or worries over inflation crop up again, gold prices would be the biggest beneficiary. The presidential election in the fall could catalyze the Federal Reserve to take action via monetary easing if the economy shows signs of weakness. Monetary easing (or even the expectation of it) generally leads to higher gold prices as expectations of inflation grow.
Some commentators believe a new round of quantitative easing is imminent. “Bernanke will do everything in his power to make Obama look good to get re-elected,” says Chris Marchese, a contributor to The Morgan Report. Marchese is so confident this will happen, he’s predicted silver prices could spike as high as $70 an ounce this fall (nearly double where it’s at today). If silver prices do that, you can bet gold prices won’t be sitting still either.