What a Difference Five Years Makes
September 25, 2017
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
Looking at the precious metals, let’s first notice that platinum’s premium to palladium has all by disappeared. Five years ago today, platinum sold at a $972/oz. premium to palladium; today that premium has fallen to $14/oz.! Then palladium was inexpensive enough to force auto makers who must use one of these “platinum group metals” in the catalytic converters mandated on all modern day internal combustion engines, and since as palladium usage has increased relative to platinum usage the spread has narrowed inexorably. At this point, however and rather obviously, palladium’s growing preference over platinum has all but disappeared. There shall come a time when platinum will again be the preferred PGM but that time has not yet arrived [Ed. Note: At this point, we thought we’d note here just how much things have changed in other markets over the course of five years, for then the Yen/dollar was 77.75; it is 112.00 presently, so the yen has fallen 44% over that period. The EUR at the same time was 1.2910; it is 1.1950 presently, so it too has fallen but by a much more meagre 7.4%. Sterling then was 1.6250; it is 1.3490 presently, so Sterling’s fallen 17% in the course of five years. The Canadian dollar was then .9795; it is 1.2335 today or 26% lower vs. the US dollar, while the Mexican Peso was then 12.89 and is 17.64 so it has fallen 37% vs. the US$. Most notably of all, perhaps, over that period is the material weakening of the Russian Ruble, for it was then 31.16 vs. the US dollar and it is today 57.50, or 85% lower than it was then. Things do indeed change!
Turning to gold [Ed. Note: Given our “look” at the forex market’s moves over the course of the past five years, we should note here that gold then was $1768/oz.; it is $1292/oz. this morning, so it has fallen 27% over that same period.], it is a bit weaker, trading a bit below where it was Friday morning and trading below where it closed Friday afternoon. Interesting, it is so perhaps as a result of the weakness in the EUR, which under most circumstance would always have gold trading a bit lower. For a short while last evening gold was holding steady, which we found at least reasonably impressive but to become truly impressive gold shall have to trade upward through €1095/oz. today or very soon and at the moment it hasn’t that ability. Support at €1080 has proven reasonably formidable, having tested that level and that level having held in mid-August; late-August and last week.
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