Gold, Silver, Platinum Group Metals - Slip, Slip Sliding Away

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Gold may follow the oil price downwards as the latter continues to decline, but at some stage the other factors governing its longer term value will take command and the price will recover. Plenty of even cautious analysts are still looking for gold to move back towards the $1,000 level again this year and this does not seem an unrealistic goal.

Precious metals seem to be on a slippery downward slope at the moment, with the slip being provided by the declining oil price. Whether there is any medium to long term justification in this is in part dubious, but it remains to be seen if the markets take it this way, and if matters remain as they are then further short term losses may well be in store for investors.

...If oil consumption, and auto production are both on the decline, so the theory goes, then platinum and palladium as primary catalysts in both gasoline production and in motor exhaust anti-pollution devices have to be vulnerable too. But platinum is in a quite severe supply shortage situation and with continuing power problems in the world's number one producer, South Africa, at worst it may be a question of supply and demand approaching balance rather than surplus. Palladium, on the other hand, which is already in surplus, could be hit hard by any fall in demand from the oil and motor manufacturing sectors so even current lower prices may not be sustainable...

At the moment gold is very much trading in line with oil with minute-by-minute charts showing a strong price movement correlation. But surely this has to be a short term phenomenon? Gold may follow the oil price downwards as the latter continues to decline, but at some stage the other factors governing its longer term value will take command and the price will recover. Plenty of even cautious analysts are still looking for gold to move back towards the $1,000 level again this year and this does not seem an unrealistic goal.

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