Precious Metals Ratio: Gold, Silver, Platinum & Palladium
With a big pop on Friday afternoon in the metals market, it is time to reevaluate our precious metals’ ratios. The most significant highlight rests in the gold-silver ratio, which currently sits at 57 ounces of silver to 1 ounce of gold. In April of last year, this ratio got near 30 ounces of silver to 1 ounce of gold and we expect such an occurrence to happen again inside a year.
Currently, as we discussed yesterday, it takes one ounce of platinum will get you .89 ounce of gold. We believe that this ratio will return to a 1:1 ratio, although it might take some time before this point is once more reached. After that, it very well could creep towards a 1.5 ounces of gold to 1 ounce of platinum ratio in the long-term, which is more standard for these markets. And so, the ratio, in terms of gold to platinum, is 1.12 ounces of gold per one ounce of platinum. It is still an attractive time to buy platinum with gold, but only if you have a significant position in gold.
The palladium-silver ratio is resting currently at around 21.5 ounces of silver to 1 ounce of palladium. Palladium is relatively cheap considering a late 2011 run-up to around $700, but then again so is silver, as the devil’s metal sits below $30.
Attractive trades look currently to be gold to silver and silver to palladium. The gold to silver swap is rather conservative considering the upside in both metals, and especially the undervalued devil’s metal. As for palladium, because it is a riskier bet except for the lack of political risk from changing laws which target gold and silver, the trade from silver to the palladium should be exercised with caution and only after one has accumulated a fair amount of silver.