Precious Metals Roundup: Gold Leads, Silver Lags

Last week saw no shortage of activity in global equity markets–not by a long shot. Greece once again dominated the headlines, as a back-and-forth plan for a referendum took markets by surprise on multiple times throughout the week, ultimately ending with a plan that seemed to point to Greece’s continued inclusion in the currency bloc. The ongoing debt saga in Europe distracted investors in part from an abundance of activity on the domestic front, including another major bankruptcy and a long-awaited IPO to close out the week.

Considering that global equity markets whipsawed violently throughout the course of last week, the changes turned in by precious metals may have been somewhat disappointing. Though gold managed to squeeze out a moderate gain, silver, platinum, and palladium all finished lower in last week’s trading:

Ticker ETF Weekly Change*
GLD Gold SPDR 0.7%
SLV Silver Trust -3.1%
PPLT Physical Platinum Shares -0.6%
PALL Physical Palladium Shares -1.1%
GDX Market Vectors Gold Miners ETF 1.5%
SIL Silver Miners ETF -1.5%
PLTM Global Platinum Index Fund -3.0%
SPY S&P 500 SPDR -2.4%
UUP US Dollar Index Bullish 2.6%
*Week ended November 4

Gold’s movements continue to puzzle investor; the yellow metal maintains significant safe haven appeal on some days, but not on others. After slumping to open last week, gold rallied on both Wednesday and Thursday, jumping by about 1.0% and 1.6%, respectively. A surprisingly strong dollar likely helped to keep precious metals in check last week, potentially positioning these commodities for a rebound if the greenback fails to hold those gains in coming sessions.

GDX, the popular gold mining ETF, appeared to be back on track–at least for one week. Investors often expect gold mining stocks to trade as leveraged plays on the spot metal, but that relationship has not held for much of 2011. Last week marked another solid stretch for GXD, with the fund climbing on strong earnings reports and a small jump in bullion prices. Other mining ETFs, however, weren’t quite so lucky; the Global X Silver Miners ETF (SIL) lost 1.5% while PLTM, which invests in companies focused on platinum mining, lost 3%. SIL’s loss was much smaller than the underlying metal, while PLTM’s slide far outpaced the drop in spot platinum prices.

Platinum, Palladium Fail To Rally

Perhaps the biggest disappointments in the space last week were the “other precious metals” of platinum and palladium. Though not nearly as popular for investment purposes as gold or even silver, these commodities have certainly attracted a fair amount of interest in recent years; PPLT and PALL, physically-backed ETFs linked to platinum and palladium, respectively, have more than $1 billion in aggregate assets.

Because platinum and palladium are both used widely in the production of catalytic converters, there is generally a loose connection between these metals and the health of the global automotive industry. So news last week that October car sales were unexpectedly strong should have been a good sign for ETFs offering exposure to these metals. Sales in the U.S. jumped by about 8% in October, marking the second strongest month of the year. Chrysler sales jumped 27%–the fifth straight month of 20%+ sales growth. And Hyundai reported a record month in car sales; the Korean manufacturer has already broken its annual record set in 2010.

But the pleasant surprises in the auto industry didn’t translate into gains for the precious metals used in some components; PPLT and PALL were both down on the week.

Perhaps the declines in PALL and PPLT were “driven” more by international factors; Brazilian car dealers reported a steep year-over-year drop in automotive sales. Since emerging markets represent a major source of earnings and growth potential for carmakers, reports of an overseas slowdown likely spooked investors.

Disclosure: No positions at time of writing.

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