This spring, as gold topped out at over $1000 per ounce, platinum hit $2250, silver breached $20, and palladium reached $579. The ratios at the time were roughly 1:0.45, 1:50, and 1:1.75, respectively, about where they had been for the last several years.
Here are the five-year charts from Kitco, in order of descending pain:
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I expected gold’s increase in relative value, since the other metals are considered more “risky” assets and depend more on industrial demand, but these ratios are looking a bit extreme. The one that jumps out at me is platinum priced only 10% higher than gold, at a level where gold was trading just two days ago!
With the deflationary carnage that has taken place in the rest of the precious metals (and base metals), gold’s grip on the $800 level is looking more and more tenuous. I have been figuring on $600 for some time, but now I am thinking that $400 is not out of the question. $400 sounds nuts, but there is a massive phase shift underway, in which cash is going from a hot potato to the one thing everyone needs but nobody seems to have.
That said, gold has been increasing in value against everything but dollars and yen, and to a lesser extent, euros, pounds, Swiss francs and some other currencies. It has been acting like a currency in this deflation, though one in need of a correction. In that regard, a fall to $400 would coincide with much more extreme dollar-denominated declines in almost all other assets.
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For more on this shift, see:
Bond sell-off just a correction. Bailouts will not stop deflation.
