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What’s Moving in Precious Metals

by | Tips & Strategies

Gold is flirting with its most expensive prices since August 2011, and it’s doing so in a historically unique manner. Other precious metals such as silver and platinum are less than half the price they were at the time of gold’s previous high, and many stocks have bounced back to approach or in some cases exceed all-time highs of earlier this year.

Divergences Among Precious Metals

Silver and platinum both boast high positive correlations to gold and have moved higher with it in recent trade, but neither metal is seeing anywhere near as much success as this outperforming precious metal. Gold is up close to 20% year-to-date, while silver and platinum are approximately up 5% and down 10% on the year, respectively.

Gold
Source: dxFeed Index Services (https://indexit.dxfeed.com)

Divergences among commodities in the same asset class are considered natural, but there is often opportunity in trading relationships that deviate from historical norms. Pairs trading creates a neutral viewpoint on a broad market by taking equal yet opposing positions in two specific assets in the class. Markets like gold, silver, and platinum converge and diverge regardless of where precious metals in general are headed.

Precious Metals At Large

However interesting pairs trading might be, it is a complex process that can be quite involved for the modern trader. Formulating a strategy around the asset class at large could be a better place to start. Precious metals are traditionally described as “flight to quality” commodities, but with stocks safely near their highs they are either forecasting a volatile future or being driven by something else.

Small Precious Metals
Source: dxFeed Index Services (https://indexit.dxfeed.com)

The demand for gold and its counterparts could be coming from US dollar weakness or low inflation or other forces at play, still the price extreme stands as a distinctive tradable opportunity. Small Precious Metals gives access to gold, silver, and platinum in a single futures market that is appropriately sized for the individual trader, so you can put your opinion on metals into action with relative ease no matter the reasoning behind it.

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

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