Gold Is Too 'Pricey': Look At Platinum and Silver - Wells Fargo
(Kitco News) - With gold’s impressive rally this summer, prices might be too “pricey” for some investors, which is why Wells Fargo is advising clients to buy cheaper precious metal alternatives like platinum and silver.
“Gold has had a great run over the last year, up 17%. It’s been a perfect storm of sorts for gold, especially on the interest-rate front. With long-term interest rates declining globally, gold has been an attractive alternative to debt,” Wells Fargo head of real asset strategy John LaForge wrote on Tuesday.
Gold is a great alternative to any kind of risk, including economic instability and geopolitical tensions, noted LaForge. But, at these levels, gold is just too expensive, he added.
“As an example, the 10-year German Bund now yields -0.44%. Investors now pay to invest in German government debt. The advantage to holding gold is that it is country and government agnostic. Gold can sometimes be viewed by investors as a hedge against governments that might be fiscally/economically irresponsible,” LaForge said in a note to clients. “At $1,425 today, though, we feel that gold is pricey.”
Everything and much more has been priced into gold at and above the $1,425 an ounce level, which is why Wells Fargo is not advising to buy.
“Yes, the world has added more negative yielding debt recently, and more will likely follow. But, $1425 gold, we feel, takes into account all of that and then some. One year ago, just prior to global yields falling, gold was trading closer to $1200,” LaForge wrote.
Platinum and silver offer much more advantageous hedge solutions to investors, added the bank.
“The two we recommend considering are platinum and silver. Both are historically quite cheap versus gold, and in our opinion, may offer more upside potential should gold keep grinding higher,” LaForge explained.
Platinum is Wells Fargo’s top pick at the moment, with a lot of upside potential in comparison to gold.
“The price of platinum has mostly traded above the price of gold, but that is not the case today. For those looking for an alternative to gold, we recommend consideration of platinum,” he said.
At the time of writing, December Comex gold futures were trading at $1,483.70, up 0.49% on the day, September silver was at $16.44, up 0.29% on the day, and October platinum was at 853.80, down 0.48% on the day.