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Precious Pulse
Making sense of recent price
movements
Feature article
With markets moving wildly in the last month, we examine whether moves in
precious prices make sense in the context of market weakness and whether
this presents any investment opportunities. It appears that the movements in
gold are consistent with movements in the US$ seen in recent history. The
large moves in ratios may present some more interesting opportunities.
Latest news
Recent financial market events have largely overtaken coincident news of
activity of particular importance to precious metals. For example, auto sales
data in the US and Europe were both reasonable, with the US rising to
13.1annualised, with JD power data showing a small 1.1%YTD decline in
Western Europe, which is a good result against the background of expired
scrappage schemes and general macro economic turmoil.
But this has mattered little for the PGMs, which along with silver have fallen
sharply from levels seen in the second half of September, with gold also
pulling back rapidly from a high of $1,900/oz.
Given the wild swings in prices, it is worth assessing whether current prices
make sense relative to broader market activity. We find that
The movement in the gold price can largely be explained by the rise in the
dollar and doesn’t appear to have fallen too far or too little.
The decline in the platinum/gold ratio is a surprise against the current
level of the gold/silver ratio, which is sending a different message to the
market.
Investment trends rather than producer/consumer dynamics have driven
the rise in the platinum/palladium ratio. While it is likely that the market
will continue to be adverse to high beta, small markets like palladium in
the near term, the ratio between platinum and palladium is likely to
reverse its recent trend.
Back in early-September, we thought that we would probably need to see a
weakening USD to see gold push beyond its highs at the time. Unfortunately
the USD has seen considerable strength, rising 6.5% since the start of
September on a broad TWI basis.
The shift in currencies is a function of rising financial stress, although the USD
is no higher than it was at the start of the year. The negative relationship
between the USD and gold is certainly not surprising, although it is a
departure from what we saw in August, when gold went straight up without
much movement in FX markets.
Using a simple linear regression suggests that almost 80% of the movement
in the gold price since the start of September can be explained by the rise in
the USD TWI,
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Precious Pulse
Making sense of recent price
movements
Feature article
With markets moving wildly in the last month, we examine whether moves in
precious prices make sense in the context of market weakness and whether
this presents any investment opportunities. It appears that the movements in
gold are consistent with movements in the US$ seen in recent history. The
large moves in ratios may present some more interesting opportunities.
Latest news
Recent financial market events have largely overtaken coincident news of
activity of particular importance to precious metals. For example, auto sales
data in the US and Europe were both reasonable, with the US rising to
13.1annualised, with JD power data showing a small 1.1%YTD decline in
Western Europe, which is a good result against the background of expired
scrappage schemes and general macro economic turmoil.
But this has mattered little for the PGMs, which along with silver have fallen
sharply from levels seen in the second half of September, with gold also
pulling back rapidly from a high of $1,900/oz.
Given the wild swings in prices, it is worth assessing whether current prices
make sense relative to broader market activity. We find that
The movement in the gold price can largely be explained by the rise in the
dollar and doesn’t appear to have fallen too far or too little.
The decline in the platinum/gold ratio is a surprise against the current
level of the gold/silver ratio, which is sending a different message to the
market.
Investment trends rather than producer/consumer dynamics have driven
the rise in the platinum/palladium ratio. While it is likely that the market
will continue to be adverse to high beta, small markets like palladium in
the near term, the ratio between platinum and palladium is likely to
reverse its recent trend.
Back in early-September, we thought that we would probably need to see a
weakening USD to see gold push beyond its highs at the time. Unfortunately
the USD has seen considerable strength, rising 6.5% since the start of
September on a broad TWI basis.
The shift in currencies is a function of rising financial stress, although the USD
is no higher than it was at the start of the year. The negative relationship
between the USD and gold is certainly not surprising, although it is a
departure from what we saw in August, when gold went straight up without
much movement in FX markets.
Using a simple linear regression suggests that almost 80% of the movement
in the gold price since the start of September can be explained by the rise in
the USD TWI,
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