In May 2024, gold rose to another new all-time high, while silver rallied to its highest price in over a decade, breaking through a critical technical resistance level. Even platinum and palladium rose above $1,000 per ounce.
Even the most aggressive bull markets rarely move in straight lines, and precious metals prices have corrected from the most recent peaks. If the bull market in gold is a model for the precious metals sector, the current dips could be a compelling buying opportunity. Gold’s bull trend began in 1999 at $252.50 per ounce, with every correction providing a buying opportunity that led to higher highs. With gold closing in on a ten-fold price move over the past twenty-five years and silver recently trading to its highest price since 2013, the current selloffs in gold, silver, platinum, and palladium could be the perfect time to add precious metals exposure to your portfolio.
Gold, silver, and platinum are higher in Q2- Palladium is lower
- Gold closed Q1 at $2,217.40 per ounce. At $2,340 on June 3, the leading precious metal was 5.5% higher.
- Silver was trading $24.916 at the end of March. At $30.65 in early June, the most volatile precious metal was 23% higher.
- Platinum closed the first quarter at $907.70 per ounce. At $1,032, the leading PGM was 13.7% higher.
- Palladium, the fourth and least liquid precious metal trading on the futures exchange, closed Q1 at $1,021.50. At $930 on June 3, palladium was the only precious metal posting a loss in Q2, down nearly 9% since the end of March.
The trends are your friends in gold and silver, while platinum and palladium offer value
- Gold’s bull market began in 1999, and every correction over the past twenty-five years has been a buying opportunity that has led to a new record high.
- Silver broke out above the $30 to the highest price in over a decade.
- Platinum remains less than half the price at the 2008 $2,308.80 high.
- Palladium is less than one-third the price at the March 2022 $3,380.50 record peak.
- Gold and silver remain in bullish trends, while platinum and palladium offer value at the current price levels.
The case for higher precious metals prices
- The bifurcation of the world’s nuclear powers threatens the dollar’s role as the world’s reserve currency. The increasing potential for a BRICS currency and cross-border transactions in non-dollar terms weakens the U.S. dollar, supporting higher precious metals prices.
- The odds favor lower U.S. interest rates, which would lower the cost of carrying precious metals and weaken the dollar. Lower rates tend to lead to higher prices for precious metals.
- Geopolitical turmoil, including wars in Ukraine and the Middle East and China’s plans for reunification with Taiwan, favors safe-haven assets like precious metals.
- Global inflation remains a clear and present danger. Precious metals tend to thrive in inflationary environments.
- The divisive U.S. election increases U.S. domestic and geopolitical uncertainty for the coming years.
The reasons to only buy on price weakness
- Gold, the leading precious metal, has routinely moved to a new record high and pulled back over the past two and one-half decades. Buying on the pullbacks has been optimal.
- Even the most aggressive bull markets rarely move in straight lines. Downside corrections are healthy as they clean out speculative longs and make room for new investment buying.
- Buying on rallies can cause indigestion as they often run out of steam, leading to short-term selloffs.
The ETF products that track the four metals trading on the CME’s COMEX and NYMEX divisions
- Gold: The GLD, IAU, and BAR ETFs own physical gold bullion and do an excellent job tracking the metal. GDX and GDXJ are ETFs tracking the leading senior and junior gold mining companies.
- Silver: The SLV ETF tracks silver prices, as it owns physical silver bullion. SIL and SILV are ETFs tracking the leading senior and junior silver mining companies.
- Platinum and Palladium: PPLT and PLTM track physical platinum prices, while PALL moves higher and lower with physical palladium prices. These ETFs own physical bullion.
- Diversification: GLTR owns a portfolio of gold, silver, palladium, and platinum bullion, providing a diversified approach to the precious metals. GLTR holds over 60% of its assets in gold, nearly 30% in silver, and under 10% in less liquid palladium and platinum.
Precious metals allow market participants to participate in bullish gold and silver trends. Value-seeking investors and traders can turn to platinum and palladium that are at bargain basement prices compared to their respective record highs.
Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!