PGMs Hit by Profit Taking | Gold Steady As She Goes

March 11, 2008 | By | Reply More

Despite a degree of volatility in the gold market during the week as speculators cashed in on profits the general sentiment that $1000 an ounce was around the corner with $1500 an ounce a target by the years end kept our favorite metal on track.

Helped by further weakening of the dollar and a raft of bad news confirming that the US is in recession despite no official announcement, the yellow metal finished the week only 80 cents down from Mondays open.

In contrast the anticipated bout of profit taking amongst the Platinum Group of Metals (PGMs) after their substantial and sustained rises in the last few weeks led to some sharp falls across the board.


Here we give pause for thought as, unlike gold, PGMs are not (yet) thought of as a store of value or a hedge against inflation by the majority of investors, think India and China. Furthermore, despite production shortfalls, their uses are, in the main, either as catalysts or jewelry, both of which allow them to be recyclable.

Early generation catalytic exhaust systems fitted to vehicles will be coming increasingly on to the scrap market. Add to this the fact that auto manufacturing and sales in the US have turned significantly down and that scenario is likely to occur in the rest of the developed world as it follows the US into recession. 

PGMs have had a terrific run, there maybe more to come as investors cast around for alternatives to stocks, but a very wary eye should be kept on this sector in case a nasty turn around happens sooner than expected.

Much the same argument applies to silver although we think that its history of being in the same camp as gold as a store of value due to its extensive use in currency and a longer cycle before becoming available through scrap recovery may postpone or even prevent any dramatic fall.

As we said last week our target is $25-$28 an ounce and we will buy on any pullback below $20.

Watch out for our article later in the week that gives even more reasons to stick with gold. We show correlations with other commodities such as oil, silver etc.

Although we do not as a rule give specific stock investment tips to our general visitors to this site we will looking closely at a mining play that may have potential, if it looks right we will let you know that it is well worth your while to do some research.

We couldn’t resist an observation on the latest news coming out of the one country whose currency makes the good old greenback seem as solid as a rock. Even as I hit the keyboard it takes millions more of Zimbabwean dollars to buy one US dollar. Bernanke – eat your heart out!   

About the only worthwhile exportable commodity left to Zimbabwe is derived from mining and recently there has been an awakening of the countries potential. As readers will know, this activity calls for a lot of investment and expertise, all supplied from sources outside that land of super hyperinflation.

We can not think that any enthusiasm will be left amongst mining companies, with the possible exception of the Chinese, to expand their interests.

Finally our endnote. Acting on our own personal resolution not to put all our eggs in one basket, we have followed through on our own advice last week to get into an agricultural ETF.

We have also put agriculture stocks such as Monsanto, John Deere and others on our watch list.  We are also having a close look at aluminium producers.

Hope that gives you all some food for profitable thought! Good luck and watch out for investment hint later in the week.


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