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Lior Cohen, Trading NRG (219 clicks)
Utilities, gold & precious metals, oil & gas, commodities
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I have already posted about the near paradigm shift in the precious metals market as gold sharply rose above Platinum. Let's reexamine the gap between gold and platinum and see if there was any change in the relation between these two metals.

The chart below shows the development of gold and platinum from August 2011 to March 2012. We can learn several things from this chart. At the beginning of August 2011, when the debate over raising the U.S debt ceiling was held and the S&P announced it will downgrade U.S.'s credit rating, gold picked off very promptly as many investors were seeking safe haven investments. Platinum, which is a precious metal, isn't used as safe haven investments such as gold, therefore it didn't rise following these said events occurred at the beginning of August.

(click to enlarge)

Following the sharp fall of both precious metals' prices during September and October, the near paradigm shift occurred as gold remained above platinum.

During the past several months the linear correlation between these two metals prices sharply rose and reached at one point nearly 0.9. Currently, the linear correlation (monthly basis) of the daily percent changes between gold and platinum is still in the 0.7 to 0.75 range.

(click to enlarge)

Circling back to the first chart, during the last couple of months as gold had a downward trend, the gap between platinum and gold contracted and at certain days the price of platinum was higher than gold price.

This is a step towards a more sensible reality as gold isn't substantially higher than the price of platinum. As long as the strong correlation between the two metals will continue to be robust I speculate their prices are likely to remain near each other, at least until the next market shock that might push gold again. Despite the sharp drop in gold at the beginning of the week following the publication of the minutes of the March FOMC meeting, there are still those who believe there might be a surprise in the upcoming FOMC meeting at the end of April (but I, as many others, don't). In case of no additional stimulus plan this meeting might put platinum ahead of gold or reopen the gap so that gold will be higher again than platinum in the small chance there will be a big announcement in the next meeting.

Source: Reexamining The Gap Between Gold And Platinum