Gold Platinum Ratio Widens

Precious metal traders seem to be taking a breather as the new week unfolds. After last week’s surprises from the Swiss National bank and the Italians speculators are leaving gold sit steady at 1276.80 flat this morning. Silver fell 77 points but remains very strong at 17.673 and platinum dipped $3.35 to 1265.30 lower than gold. The gold/platinum ratio has move wider signaling a market imbalance, this could indicate that markets should see gold tumble lower.

The unexpected announcement of SNB’s Thomas Jordan caused a lot of excitement in the markets – this includes gold and silver. Precious metals bounced back last week following this news. The ongoing recovery of gold and silver is mostly related the fall in U.S. treasuries yields. The main event from last week was the decision of the SNB to stop pegging its currency to the euro. This news may have also provided the force needed to pull up gold and silver. The progress of U.S. treasuries yields may have also been impacted by the SNB decision.

Traders are expected to sit tight until Thursday’s ECB meeting. The meeting is likely to revolve around the upcoming QE program – what to expect and what are the details. Market expectations about the amount of QE are around 500-700 billion euros, but some analysts even predict that this number could, in theory, reach as high as 2 trillion euros.

The metal gained nearly 5% last week after Switzerland unexpectedly abandoned a cap on the franc. Dealers assumed that the Swiss National Bank had moved with the knowledge that the European Central Bank would take the plunge into full scale quantitative easing at its policy meeting on Jan 22.

The euro flirted with 11-year lows early on Monday as investors braced for the ECB to take its boldest steps yet to combat deflation and revive the euro zone economy. Sources have told Reuters the ECB may adopt a hybrid approach – buying debt and sharing some of the risk across the euro zone while national central banks make separate purchases of their own.

Volatility before the ECB meeting could see gold add to gains this week, but moves could be in a tight range on Monday with the US markets shut for a holiday.  

In a sign of increasing investor confidence in the metal, speculators raised their net long position in gold for the third straight week ending Jan. 13, US Commodity Futures Trading Commission data showed on Friday. Also, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.92% to 730.89 tonnes on Friday. That is the fund’s biggest daily percentage jump since May 2010. Total holdings, however, were not very far from a six-year low.

Industrial metals are trading on a negative bias, as fears of a bigger expected decline in Chinese production and growth weigh on the markets. Copper eased 19 points to trade at 2.613 near its recent low. On Friday, Copper climbed for a third day as China increased infrastructure spending to spur economic growth in the world’s largest consumer of the metal. Copper climbed as much as 1.1 percent after posting the biggest two-day gain in 15 months. The State Grid Corp. of China, which accounts for about 45 percent of the nation’s consumption of the metal, will increase spending by 24 percent this year after a 14 percent gain in 2014, the official Xinhua News Agency reported. The nation’s economy most likely expanded by 7.2 percent in the fourth quarter that is the weakest quarterly pace since 2009.