Gold Silver & PGMs – Proceed With Caution

March 16, 2014 | By | Reply More

Gold and silver are looking good with platinum and palladium following along nicely. With the Crimea crisis as a catalyst, gold has accelerated away from its steady start to 2014, while dragging silver, albeit somewhat slower, in its wake.

So why should we be cautious? We will keep this short:- sanctions against Russia are more than likely to back fire, particularly on Europe where Germany is the industrial and financial powerhouse of the region getting over 30% of its gas supply from Russia.

A falling Euro would be a likely consequence with gold appreciating as a store of value as both are already happening. But maybe, when it comes to the crunch, Europe won’t play along with Uncle Sam.

After all, Crimea was part of Russia until the fifties, well over 60% of its inhabitants are Russian speaking, second and third generations from the Motherland, so if they want to be citizens of the country they originate from, why shouldn’t they ?

Why is the West interfering?

Apparently they will have a better standard of living, better pensions, etc. as Russians and there is little strategic benefit to the West when Crimea reverts back to Russia.

When this settles down, as surely it must when the USA eventually starts thinking with its brains and not its brawn and Europe ignores any sanctions as it must, then gold will lose the appeal that this overblown crisis has started.

So we say gold – proceed with caution if you are depending on this scenario to boost the price.

Silver Lags

Silver has lagged a little but recently has picked up steam , as it always does, hanging onto golds’ coattails but it would be unwise to leave out of your reckoning the growing possibility of a worldwide economic slowdown with China and the USA leading the descent.

Heavy and light industry, electronics, medicine, lead the demand for silver. If these slow, so demand for silver shrinks, particularly as there is believed to be a significant stockpile of the metal to hand.

Platinum May or May Not Reach For the Moon

The main source of platinum is South Africa where a long standing miners strike is yet to be resolved. Apparently there are stocks enough to meet demand until end of March. Whether you take this at face value or not, any settlement of the strikes in the next two weeks is likely to pull the price back, if it lasts longer then the price should post further highs.

This seems to us to be a simple 50/50 gamble. In our opinion, a time to book profits on the metal and watch from the sidelines. Platinum – proceed with caution.

Sanctions against Russia Will Cause Palladium to Zoom

Finally Palladium where Russia is far and away the leading producer. It would be unrealistic to think that the vehicle manufacturers in the West would not have their supplies of this essential catalyst in clean exhausts severely curtailed.

It was noteworthy that China refrained from voting on imposing sanctions on Russia, thus keeping their good relations intact to the benefit of China’s burgeoning motor industry at the expense of European and American manufacturers. Another bet that could go wrong if the Crimea issue is settled quickly in the event that the USA comes to its senses.

Miners Look a Fair Bet

On the plus side miners of gold and silver are bringing their costs under control, giving a leveraged entry into both metals providing you stick to seniors with lower production costs and giving very careful analyses to any juniors that take your fancy.

But if any of these settlement scenarios play out in the short term then look out for a sharp reversal as speculators scurry to the exits. However we would then expect gold to regain its upward momentum with silver making some fragile headway.

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