Has a new upcycle begun for Precious metals?

Dear PGM Capital Blog readers,

For investors, the last 12-months and in particular this year has been one gigantic roller coaster ride.

We began the year 2016, with the worst two-week start in recorded history for the U.S. Indexes, after the first 10 trading sessions, all three major U.S. indexes were showing losses of between 8% and 10%, and those losses would worsen slightly through mid-February as can be seen from below chart of the broad-based S&P 500.

Year-to-date the Euro appreciated with almost 6.5 percent against the US-Dollar as can be seen from below 1-year chart.

On the other-hand, precious metals are going insane right now, thanks in large part to the weaker U.S. dollar.

Year-to-date, palladium is up 7 percent, rhodium 12 percent, platinum 19 percent, gold 21 percent and silver 25 percent.

Below 1-year chart shows the comparison of price movement of the Dow Jones Precious metal index and the US Dollar Index.

Below 2-year Gold price history chart and the 1-year Silver price charts show that the gold and silver price are currently respectively at 1.5 and 1 year high.
Gold 2-year chart

Silver 2-year chart

For mining companies, rising underlying commodity prices can mean a boost in margins as long as costs remain under control.

With many gold and silver miners focusing on cost reductions and ore grade/production improvements over the last few years, we could be on the cusp of witnessing profits explode higher and subsequently their share prices.

Below 1-year chart, which compares, the performance of the Global Silver Miner ETF (Blue chart), with them Market vector Gold Miners ETF (Red Chart) with the broad-based S&P 500 (Green Chart), proves the above.

The PGM Component 50 Index, in which precious metals and the securities of their miners have a weight factor of 54.9% has outperformed all major index Year-to-date as can be seen from below chart.


Many analysts are already making comparisons between now and 2007, when precious metals skyrocketed in an unprecedented bull market with Gold and Silver peaking in respectively September and May 2011 at respectively US$ 1,900.00 and US$ 46,00 an ounce.

Several prominent financial institutions are currently bullish on precious metals and believe that new upcycle has begun for the gold sector, estimating that this upcycle would take the Gold price between US$1,800 and US$3,000.00 per ounce over the next three to four years.

Whether or not this turns out to be the case, it’s clear that sentiment in precious metals has shifted dramatically, giving the group newfound momentum.

A correction at this point would be healthy, but looking ahead, with the traditional yearly Gold seasonal bull market which runs from July to November as can be seen from below chart, we believe that this rally appears to have legs.


Last but not least, before following any investing advice, always consider your investment horizon, risk tolerance and financial situation and be aware that prices of precious metals and the stock of their producers might be very volatile and that sharp corrections may happen in the short term.

Yours sincerely,

Suriname Times foto

Eric Panneflek

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