Gold Platinum ratio explained. Buy physical Platinum? 7 August, 2020
Gold Price Forecast relative to
Long Term Monthly (LT-M) – Medium Term Weekly (MT-W) – Short Term Daily (ST-D) – and Hourly (not shown) data
(Previous week in brackets)
|Au Trend||↑ (↑)||↓ (↑)||↓ (↑)|
|Au % Risk
|96 (94)||94 (95)||93 (91)|
|PT Trend||↑ (↑)||↑ (↑)||↓ (↓)|
|Pt % Risk
|65 (57)||82 (81)||80 (71)|
|Allocation||Pt:40% Au:60% (Total 100%)|
Gold/USD live price
On Friday August 7 we have increased our total precious metals allocation (Gold, Silver Platinum) from approx 30% of total assets to 40% (The new 100% allocation) though a further purchase of Platinum at around 965. The reason is that we trust PM better than our banking system and the PM rally is of historic proportion. We expected the start of the secular bull market as it found a major bottom at the end of 2015 and informally went long Gold and Silver in October 2018. The PM strong price acceleration in recent weeks confirms a wider acceptance and proof of a real safehaven proposition. Mainstreet hasn’t yet begun to realize what is going on.
WHY BUY PLATINUM IN 2020?
Let’s look at the risk numbers for the Gold/Platinum ratio in all time frames
Gold/Platinum ratio Quarterly (1972-2020)
The Gold/Platinum ratio always fell as Gold moved up, meaning Platinum would get relatively strong as a consequence. Except since 2014 as Gold paused trying to find its bottom and Platinum continued to show weakness for strong fundamental beliefs and sheer lack of demand. However on every occasion since 1971 the Gold to Platinum ratio always followed a bearish or bullish divergence risk to price scenario. Platinum has been 2x as expensive as gold and Gold recvently was nearly 2.5x as expensive as Platinum. The current picture is extremely bearish which leads us to believe that Platinum could easily double in price and possible shoot into an extension with a 200 to 300% price rally from the present level of between $900 and $1000, hence a minimum objective of $2000+
Gold/Platinum ratio Monthly (1996-2020)
The monthly time frame is no different with a massive bearish risk to ratio divergence screaming for a strong rally in the Platinum price.
Gold/Platinum ratio Weekly (2015-2020)
The weekly is interesting as it clearly showed bearish divergence in the ratio=1.60 range wheras Platinum showed a very similar destructive price action as Silver in March 2020. The Gold/Platinum ratio quickly rallied towards 2.40 just as the Gold/Silver ratio did towards 125. In Elliott terms we would call this March 2020 peak action an irregular top. On this Medium term time frame alone we expect this ratio to drop back towards the mid 2019 or 1.40 Gold/Platinum ratio bottom.
Gold/Platinum ratio Daily (2019-2020)
The Daily timeframe shows the Gold/Platinum ratio with perpetual bearishness since the March peak at 2.47.
Arguably we could even expect Platinum to strongly outperform Silver, although the Silver price is now showing the kind of elevation that must be taken very seriously. This is the time where holding physical Gold, Platinum and Silver OUTSIDE of your residential jurisdiction is absolutely key.
From experience we would expect platinum to benefit more strongly as demand volumes will increase beyond regular supply. This is likely to generate a major catchup towards equilibrium to par with gold, i.e. at least a 100% increase in the price of platinum between now and possibly as early as the end of 2020. This is an opportunity trade lead by technical indicators and not supported by fundamental considerations, which considerations typically lag behind price movement. In our opinion PT is as good as AU and it is always better to buy when no one wants it.
As far as outright Gold and Platinum, there is no change to our earlier view on Gold or Platinum as we haven’t yet seen the MT and LT price to risk weight divergence in gold necessary to begin considering a long term price top. Our total position in precious metals has increased away from Bank deposit with most weight on Silver. Silver 60%, Gold 25% and Platinum 15%.
31 July:: Gold price: what to expect for August 2020;
These are not normal circumstances and the strong advanced of gold moving through the previous all time high without any hesitation tells us it is very different this time. The 500 dollar rally in just 4 months is only a hair larger than the May-Aug 2011 rally, but this time, long term risk weight has not shown successive tops with bearish divergence yet. Even though all time frames show very high risk, we are wise to respect this market’s direction especially with a more noticiable disparity between physical and paper metals. The gold price can easily pause and retrace, but the risk of only mild bullish divergence causing further massive advance is substantial. Precious metals are telling us that trust in fiat is waning.
Platinum made its initial move but again paused its intended catchup with Gold. It is a matter of when not if, so we stay we this 30/70 mix and fully invested until long term signals give serious risk of massive correction.
Platinum/USD live price
(Previous week in brackets)
|Trend||↑ (↑)||↓ (↓)||↓ (↓)|
|82 (74)||90 (92)||93 (73)|
Silver/USD live price
31 July:: Silver has finally begun to catch up with expected volatility. We stay fully committed until at least first equilibrium of most recent decades is reached around Gold/Silver ratio at 60-65. Silver/USD found horizontal technical resistance at 26.00. A break of that level is a matter of patience which opens a rally to the next target of around 35-36 handle. which is the upper end of the range between early 2011 and April 2013. Given that LT risk weight is in an uptrend and MT now turning down, Silver could temporarily pause and/or retrace until the next advance towards 36.00. which is the most likely scenario. NO change.
GOLD/SILVER Ratio Price Risk Analysis
(Previous week in brackets)
|Trend||↓ (↓)||↑ (↓)||↑ (↓)|
|38 (40)||7 (10)||28 (27)|
|Allocation||50/50 AU/AG (50/50 AU/AG)|
Gold/Silver Ratio live price
31 July:: The Gold Silver ratio does technically look a little bit ahead of the down trend and could pause in the 81-85 range for several weeks. But as the LT is still in a strong downtrend the risk of a quick push into the long average of 60-65 is entirely feasible. Hence staying with the balanced allocation between Gold/Platinum and Silver. ST risk may quickly divergence from MT and LT thus creating further room for a weakening GoldSilver /ratio.