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Across all of the precious metals we cover, spot prices saw their largest increases in well over a year.
Gold and silver appreciated 2.5% and 6.4% respectively over the last 30 days. The metals were boosted primarily by unrest in the Middle East and Ukraine, along with an announcement claiming the European Central Bank may implement a quantitative easing policy in coming months. Although we saw investors take profits on their positions ahead of Janet Yellen’s semiannual testimony, we’ve still seen ample appreciation and view this brief sell-off as a long-term buying opportunity.
Platinum and palladium were on a tear as well, appreciating 3.9% and 7.2% respectively. Although some analysts expected a pullback after members of the Association of Mineworkers and Construction Union returned to work after a 22-week strike, others are expecting further strength. Much of this renewed optimism stems from the fact that 45% of global platinum production was restricted during the five-month strike, which is roughly 60% of South Africa’s—the world’s largest platinum producer—annual production. When you consider that it may take an additional six to eight weeks to get the mines back up to speed, we could see supply crimped even further, which is bullish for prices.
All in all, it was a great month for all of our precious metals holdings. Even more encouraging is the broad appeal, as an evenly weighted portfolio of our four main metals would have a realized a return of 5.04% over the last month. Considering that the S&P 500 returned only 1.79% over the same period, you can see why we believe precious metals fit into any diversified portfolio.
As always, we’ll continue to track developments in the precious metals market and will bring any important news to your attention.
The US stock market has been strangely calm as of late, and this has some investors on edge. The VIX—a barometer of near-term expected volatility—has hung far below historic norms for the past few months. As seen in this month’s featured chart, the S&P 500 has now gone 63 days without a 1% daily swing. Before this streak started, the S&P 500 had only experienced trading three days this year with moves of 2% or greater. The last time markets were this quiet was in 1995. The concern is that investors are reluctant to get behind big moves.
Normally, these statistics wouldn’t give investors much pause, but they’re tough to overlook considering the big picture, which includes ultra-low volume and extremely overweight bullish sentiment. A correction may not be imminent, but it’s hard to argue that the US stock market isn’t overdue. The S&P 500 hasn’t had a 10% correction since the summer of 2011.
US equities have defied the odds for some time now. Major indices are hovering just below all-time highs, and equity valuations are stretched by most accounts. Precious metals, on the other hand, look far more attractive. Gold and silver are priced well below their historic highs, and the case for a secular precious metals run has never been stronger. It’s tough to say if the tranquility of the US stock market is calm before the storm, but it’s never too early to take precautionary measures.