These Precious Metals Need to Lead Again

Gold gets most of the attention, but when precious metals and the relevant exchange traded products rallied earlier this year, funds such as the ETFS Physical Platinum Shares (NYSEArca: PPLT), iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) displayed noticeable leadership traits.

Earlier this year, as gold soared, platinum metals got in on that act, too. However, platinum and PPLT recently experienced a lengthy pullback. A strengthening dollar is also weighing on platinum and PPLT. The same holds true for SLV and SIVR, which have recently rallied off their October lows and are each up more than 3% over the past week.

Although platinum is not as heavily traded as gold or silver, it is the third-most traded precious metal in the world and it is more scarce than its more popular rivals. Industry observers also believe that platinum companies have overextended operations during the commodities boom in prior years and have suffered from an oversupplied market as a result.

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Year-to-date, silver has mirrored the surge in gold in response to ongoing market volatility. Silver has exhibited a correlation of over 80% to gold and typically moves in the same direction as the yellow metal but in larger movements.

“On October 21, Platinum was trading at a $332 discount to the price of gold, and over the last few sessions, it has trimmed close to $30 from that level. The strength in platinum compared to gold is a good sign for the overall precious metals sector. Platinum has been a follower rather than a leader in 2016,” according to a Seeking Alpha analysis of platinum and silver.