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Find value in other precious metals as gold prices consolidate - Aberdeen Standard Investments

Kitco News

(Kitco News) - The gold market may have found equilibrium as prices appear to be in a holding pattern around $1,500 an ounce, but one market analyst said that there is still plenty of value in precious metals markets.

In a recent interview with Kitco News, Steven Dunn, head of Exchange Traded Funds at Aberdeen Standard Investments, said that while gold will always be an attractive investment in a world awash with uncertainty, prices could struggle as a lot of bad news has been priced in with this past summer’s exceptional rally.

“The market seems to be really comfortable with $1,500 and I think what people are waiting for is more dovish action from the Fed,” he said. “I don’t think we will see a lot of big moves in gold until we get some new information.”

Dunn’s comments come as renewed selling pressure has hit gold. December gold futures last traded at $1,501.60 an ounce, down 0.75% on the day.

However, if investors are looking for value, Dunn said that they should look at other precious metals, such as silver and platinum.

Gold’s rally this summer also sparked renewed interest in silver, but Dunn added that the grey metal still has a lot of catching up to do.

Although off a multi-decade high, the gold/silver ratio remains well above the historical average. Kitco.com shows the ratio currently trading at 85.40.

With gold in a new consolidation phase, silver price have struggled for the past month with prices falling below $18.00 an ounce. December silver futures last traded at $17.585 an ounce, down 1.26% on the day.

Along with silver, Dunn said that he is also bullish on platinum and palladium. However, he added that there is more value in platinum as palladium has come off of all-time highs above $1,700 an ounce.

Palladium’s significant supply crunch will continue to support prices but the bull market could be running out of momentum.

Both palladium and platinum are critical metals within the auto industry and are key components in auto catalytic converters, which are used to reduce harmfull emissions. Palladium is traditionally used with gasoline engines and platinum is used in diesel vehicles. However, palladium can be substitute for platinum.

“It takes time before we see substitution in the palladium market but if prices remain elevated then it could be only a matter of time before auto companies turn to platinum,” said Dunn.

Although platinum’s market has a significant surplus, Dunn said that it wouldn’t take a major shift in demand.

Some investors have been hesitant to jump into PGMs because there are worries that a global economic slowdown will weigh on both precious metals as it means few cars will be sold. However, Dunn said that it's less about the amount of cars sold than the amount of metal being used.

“Emission standards are tightening around the world and even if less cars are sold the amount of metal being used to reduce emission is growing significantly,” he said.

While gold is used as an important diversifier in a portfolio, Dunn said that a diversified precious metals position can as be a useful tool. Along with individual precious metals ETF, Aberdeen also offers a basket ETF (NYSE: GLTR) that holds physical gold, silver, platinum and palladium.

Dunn added that the basket is heavily weighted with gold and exposure to other metals.

“Not only does GLTR provide you important diversification in your portfolio but give you more robust exposure,” he said. “Anyone with exposure to palladium within the last year has done well.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.