“When the oil price drops rapidly, gold and platinum have provided a better hedge to oil price volatility than silver,” Gold said. “Platinum, however, significantly outperforms both gold and silver during the largest weekly oil price drops on average. This may stem from the fact that a large part of platinum demand is tied to auto sales and with a fall of 15% or more in oil prices, this may boost market expectations of future auto sales spurred by a lower oil price environment.”
Lastly, while shifts in reserve currencies may weigh on precious metals, shocks from emerging market currencies may be relatively limited.
“For emerging market (EM) currencies, the sensitivity is broadly negatively correlated but more limited compared to reserve currencies,” Gold added. “Therefore shocks to these currencies may be more limited to metals prices.”
Consequently, investors who want to use precious metals as a short-term hedge may consider a number of physically backed metals-related ETFs as a way to diversify a traditional stock and portfolio, including ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), ETFS Physical Silver Shares (NYSEArca: SIVR), ETFS Physical Platinum Shares (NYSEArca: PPLT) and ETFS Physical Palladium Shares (NYSEArca: PALL).
For more information on the metals market, visit our precious metals category.