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What’s Moving in Precious Metals

Gold is flirting with its most expensive prices since August 2011, and it’s doing so in a historically unique manner. Other precious metals such as silver and platinum are less than half the price they were at the time of gold’s previous high, and many stocks have bounced back to approach or in some cases exceed all-time highs of earlier this year.

Divergences Among Precious Metals

Silver and platinum both boast high positive correlations to gold and have moved higher with it in recent trade, but neither metal is seeing anywhere near as much success as this outperforming precious metal. Gold is up close to 20% year-to-date, while silver and platinum are approximately up 5% and down 10% on the year, respectively.

Gold
Source: dxFeed Index Services (https://indexit.dxfeed.com)

Divergences among commodities in the same asset class are considered natural, but there is often opportunity in trading relationships that deviate from historical norms. Pairs trading creates a neutral viewpoint on a broad market by taking equal yet opposing positions in two specific assets in the class. Markets like gold, silver, and platinum converge and diverge regardless of where precious metals in general are headed.

Precious Metals At Large

However interesting pairs trading might be, it is a complex process that can be quite involved for the modern trader. Formulating a strategy around the asset class at large could be a better place to start. Precious metals are traditionally described as “flight to quality” commodities, but with stocks safely near their highs they are either forecasting a volatile future or being driven by something else.

Small Precious Metals
Source: dxFeed Index Services (https://indexit.dxfeed.com)

The demand for gold and its counterparts could be coming from US dollar weakness or low inflation or other forces at play, still the price extreme stands as a distinctive tradable opportunity. Small Precious Metals gives access to gold, silver, and platinum in a single futures market that is appropriately sized for the individual trader, so you can put your opinion on metals into action with relative ease no matter the reasoning behind it.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the “risk disclosure” webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

About Frank Kaberna

Frank Kaberna is the head content strategist at the Small Exchange. He produces everything from brochures to videos that inform on the Small Exchange’s products. After earning a mathematics degree from the University of Michigan, Frank traded interest rates at the Chicago Board of Trade. He then worked on the tastytrade Network as a content producer and on-air talent before landing at the Small Exchange.

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