The USD is currently very strong, however that can buckle with hints of QE3, causing an inflow of demand for gold as a tangible currency. Investors flock to gold as the universal reserve currency instead of silver as gold is the benchmark. The metals have been relatively flat this week as they are waiting for the release of the FED minutes due to be released next Wednesday.
Investor’s preference for gold is also evident with the currently weak Platinum/Gold ratio. The spread is trading at under 1. The price action of this pair indicates the relative strength of gold as a reserve currency, considering that platinum is roughly 19 times more rare than gold. Whether platinum is underpriced or gold overpriced, I have been looking at selling gold and buying platinum in anticipation of the pair moving above 1.
Front month gold futures were trading at $1607.30, silver futures were at $27.90 and Platinum was $1397.50 as of this morning.
David Cornes holds a degree in economics from the University of Montana.
