Silver and Platinum Have Snapped Their Traditional Gold Bond (SLV, GLD, PPLT, IAU, SGOL)
The co-relationship between gold and silver should be 16-1. And platinum should be priced higher than the yellow metal.
At present, both commodities are trading much lower than the historical price ratios due to heavy demand for hard assets – particularly in India and China — drives up the price of gold and the global economic slowdown keeps both silver and platinum on a tight leash.
The exchange-traded fund for gold, SPDR Gold Shares (NYSEARCA:GLD), is up about 15% for the year. The primary silver ETF, iShares Silver Trust (NYSEARCA:SLV), is lower by more than 5% year to date. ETFS Physical Platinum Shares (NYSEARCA:PPLT), the primary ETF for platinum, is off almost 20% for 2011.
This evinces the speculative demand for gold while both platinum and silver have much greater industrial usage. Over 90% of gold (NYSEARCA:IAU) is for investment purposes only.
If the 16-1 correlation between gold and silver were holding, silver would be at $100 an ounce rather than around $30. Or, on the other hand, gold would be closer to $500 an ounce, rather than $1600.
At present, there is a 3.89% short float for GLD. The short float for SLV is 6.90%.
GLD, PPLT and SLV are all up for the week. If the U.S. dolar and other currencies weaken, gold, silver and platinum should rebound in price as investors flee fiat currencies.
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