Gold, Platinum, and Miners: Oh My

• Posted by kid dynamite
• on February 17th, 2013

People are kinda talkin’ about gold a lot lately.   I wanted to write this post to stress the importance of perspective in terms of the timeframe you are looking at when one looks at charts as a trader.   For example, the 6 month gold chart (all charts via Stockcharts.com):

paints a very different “wide angle” picture from the 1 year gold chart:

the 2 year gold chart:

and the 3 year gold chart:

Nope: I didn’t draw any trendlines on those charts.  I didn’t clutter them with indicators like RSI, MACD or accum/dist, although I did leave some moving averages on there.   My point is simply to consider other perspectives when you’re forming your trading opinion.  To me, the 6m chart looks ugly, the 1 year chart looks almost as ugly, the 2 year chart looks the best of all (like I could talk myself into drawing a rising wedge on it), and the 3 year chart is an extension of that 2 year interpretation, with some more perspective behind it.

When looking at gold, I also like to look at its performance vs the gold miners ($GDX) and platinum.  So let’s do that.

GDX:Gold ratio: I’m not going to put up a bunch of timeframes for this chart, because they all tell a similar story: the miners have sucked compared to gold, and there’s a good explanation for that:  as various exchange traded products have made exposure to the price of gold easy to come by without the execution risks of the mining sector, the miners have continued to underperform the metal.  I was, at one point about 18 months ago, long GDX and short GLD, but I bailed on that trade and have seen no reason to attempt to re-enter it:

Platinum:Gold ratio – this one can use some perspective as well.  First the 6 month:

and then the long view: 3 years:

Platinum has ripped vs. gold lately, but the longview shows us that it’s far from extended based on recent historical relationships.

I have no positions currently in gold ($GLD) or $GDX.  I have a small long position in $SPPP (platinum/palladium).  I am long a worthless silver call option on futures.  The point of this post is not to put forth a view on any of these metals – or to try to convince you of any bullish or bearish outlook -  but rather to simply remind readers to consider different time periods on their charts, which will often paint very different views.

Of course, not everyone approaches the metals as a trader.  If you’re interested in buying and holding physical gold, I actually have a contact for my readers who is nationally regarded especially in terms of numismatic activity.  If you contact me via the “contact” tab at the top of this page, I will forward you his info.  Other potential generational-holders of gold might be interested  in a gold IRA.   I do not currently have, nor have I ever had, a gold IRA.

-KD

 

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