IBD likes platinum; not gold or silver

Platinum has outperformed gold and silver in the short-term and over the past year. That bodes well for the future of the industrial metal.

And the newspaper gives five reasons why:

  1. Platinum has outperformed gold and silver in the short-term and over the past year.
  2. Strong car sales mean higher platinum prices, particularly since 40 percent of mined platinum goes into catalytic converters.
  3. Mine strikes in South Africa have seriously dampened platinum supplies.
  4. 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.
  5. Growth in China means more platinum jewelry sales.

Source: Investors.com.

Platinum more attractive than gold, famed money manager says

‘Whenever you can buy platinum at cheaper than the price of gold, it’s a pretty good idea,’ according to a famed money manager. Look for the white metal to potentially outperform gold in the near-term.

There was a rare occurrence in the precious metals markets last fall. The price of platinum slipped below the price of gold, and that prompted famed money manager Michael B. O’Higgins to sell his gold in favor of platinum.

“Whenever you can buy platinum at cheaper than the price of gold, it’s a pretty good idea,” O’Higgins said in a recent interview with Jim Puplava of Financial Sense.

In general, the price of platinum hovers about 25 percent higher than the price of gold. In some instances, the white metal has traded 2x higher than price of gold. That makes the recent price flip-flop look all the more attractive, Higgins says – especially since he sees gold going as high as $6,000 an ounce.

“(Today) people ask me, if you had to give a number, honestly, I have no idea what (gold prices are) going to do, and nobody else does, but I would guess 6,000 for both the Dow and gold at some point over the next few years. Which would imply platinum at $7,500 if the average ratio of platinum to gold were to revert.”

If nothing else, O’Higgins – the author of two influential investing books: Beating The Dow and Beating The Dow With Bonds – is putting his money where his mouth is. And his track record with those big bets is good.

O’Higgins first bought gold in 2002 when he sunk 25 percent of his cash into the yellow metal. He cashed out in September, and now he’s looking to compound those gains with platinum. Perhaps it’s time the rest of us look at the white metal, too.

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Michael O’Higgins calls for gold at $6,000 an ounce

Famed money manager expects the Dow:gold ratio to revert back to 1:1, much like it did in January of 1980. If that happens, we could see gold at $6,000 an ounce.

About a decade ago, famed money manager Michael B. O’Higgins saw a chart in the “Letters to the Editor” section in Forbes that showed the historic ratio of the Dow to gold. He noticed the ratio stood at a remarkable 1:1 in January 1980. At the time Mr. O’Higgins was looking at the Forbes chart, the Dow:gold ratio stood at 44:1.

“It just hit me that Ben Bernanke was going around, he was threatening people that he was going to pull out all the stops to fight deflation and so on, so that’s when I started getting interested, and in January of 2002, I put 25 percent of my money in gold and gold-related stocks at around $280,” O’Higgins told Jim Puplava of Financial Sense in a recent interview.

O’Higgins made the bet when the gold-to-Dow ratio stood at 36:1. Today, the ratio’s around 8:1, but O’Higgins predicts the ratio will fall to 1:1 over the next few years.

“I still think at some point here, gold will trade even with the Dow,” he said on Financial Sense. “Now, today that would be $13,000. When I first bought gold at $280, people would say, ‘Well, where do you think it’s going to go?’ I said, ‘$1,000.’ It’s a chip shot because at that time, the Dow was 10,000, and 10:1 is the long-term average ratio of the Dow to gold. But, I said, ‘It’ll probably go to one-to-one, but at a lower Dow number.’

“(Today) people ask me, if you had to give a number, honestly, I have no idea what it’s going to do, and nobody else does, but I would guess 6,000 for both the Dow and gold at some point over the next few years.”

That could lead one to think that now’s the time to jump into gold, but O’Higgins actually thinks platinum could perform better. If gold hits $6,000 an ounce, O’Higgins says, that would imply $7,500 platinum. That’s why the money manager sold his gold holdings and shifted to platinum in September. It’ll be interesting to see if O’Higgins’ bet pans out.

O’Higgins is the author of two influential investing books: Beating The Dow (1991) and Beating The Dow With Bonds (1999).

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