The Hindu Business Line : Yellow or white metal?

Which is the best precious metal to invest in: gold, platinum or silver? Gold is the ubiquitous choice due to the glamour and glitter attached to it. However, let us try and find the answer through technical analysis. Last August was the turning point for the stock and commodity market. We note that in August 2007 gold started its rally from its low of $641.

Platinum and silver also reversed higher at the same time but they outperformed the gold in the subsequent rally. This up-trend came to an end in March 2008. Gold appreciated 60 per cent from the August 2007 low whereas platinum and silver gained 88 and 92 per cent respectively. After peaking in March these metals reversed direction and commenced a downtrend. The decline accelerated in July and August when these commodities penetrated their key support levels. Gold found support at around $785 after retracing 61 per cent (Fibonacci retracement level) of the up-trend from the $641 trough. Platinum and silver failed to find support at 61 per cent retracement level and they have almost retraced the entire prior up move. Platinum halted at $1300 and silver at $12.39.

Platinum and silver outperform while trending higher but their declines are equally swift and of greater magnitude when compared to gold. From March peak to August low this year, platinum and silver lost 43 and 41 per cent respectively while gold lost only 25 percent.

If we consider the performance of these metals in the year from August 2007, gold leads the gainers list with 20 per cent, silver is second with 12 per cent gain while platinum could rise only 6 per cent.

It is apparent that though gold might underperform silver and platinum in run-away rallies, it protects investor wealth better in correction and delivers higher return over a longer time frame. Investors with lower risk appetite can continue to chase gold while those willing to take greater risk in their quest for higher returns can trade in silver or platinum.

Gold outlook

After taking support at $785 in mid August, gold began to trend up, supported by a positive divergence in the daily relative strength index. The immediate resistance for gold is at $860. If this level is surpassed, it can encounter next key resistance at $930. On the other hand if gold breaks $785 levels conclusively, it could reach $700.

Silver and Platinum outlook

The immediate support and resistance levels for platinum are $1335 and $1850 respectively. The immediate support and resistance levels for silver are $12.50 and $16.50 respectively.

— Yoganand D.

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