Bolling: The Gold and Platinum Connection

Anyway, back then I used to wait for a roar from a pit and wander into it to see what was trading. That's how I found gold. The gold pit was a proud pit. Gold traders were tough as nails. They took no prisoners. To make a long story shorter I started trading gold and platinum because of the roar.

On one occasion, gold was busy and so I went over to the gold pit. It seemed that there were good buyers so I bought gold. As I walked back to Nymex, the gold rally started to fall apart. I was long gold at $404 and it was down below $395. I happened to be walking past platinum (which trades on Nymex) and saw that platinum was selling off too. I sold some platinum to hedge my long gold. Wow! I quickly learned about the volatility of platinum. By the end of the day I had lost $45,000 in gold, but even late to the spread (pair trade) my platinum was up almost double. I then realized that I needed to watch these two distant cousins, traded on different exchanges, for opportunity.

Over my 22 years trading, I have watched the relationship between gold and platinum prices. It is a rare occurrence that platinum, the more precious metal , has traded down to the gold price. It happened in 1987 after the crash. It also happened in 1991 and 1997. But only in 1991 did platinum dip below gold. On all occasions platinum rallied substantially after the parity price. In 1987, platinum went $235 over gold ($635 vs. $400). After a brief week trading parity in 1997, platinum took off and has never looked back, trading a whopping $1165 over gold ($2200 vs. $1035).