4 Dec 2014 by Jim Fickett.
The gold price is driven entirely by investor sentiment, and the prices of silver, palladium and platinum are heavily influenced by investor sentiment. In such cases it is very useful to compare current prices to inflation-adjusted historical averages. This technique has served me very well. I sold both silver and gold fairly near their recent peaks (Rebalancing gold, Sold some old silver coins) and also more than doubled my money on palladium by buying when the price was historically low and selling when it was high (Sold palladium, Sold palladium, +172%, Sold last of palladium; +189%).
Here, then, is an update on precious metals prices in an historical context.
Silver is only 4% above its long-term historical average price. Leaving all supply and demand issues out of the picture, and just looking at price, this suggests that silver bought today can probably be sold at some future date at a higher price.
Gold is 59% above its historical average. So even though it has come down quite a lot lately, there is no margin of safety in the current price.
Palladium is more than double its long-term average price. This might or might not be justified by supply factors, which are complex.
Platinum is 25% above its long-term average price. In my view this premium is justified by increasing cost of production, and I think platinum is a bargain (Platinum: The short-term price drop is an opportunity). Nevertheless, the long-term average price analysis alone does nothing to add to the case.
(For data, graphs, previous commentary, and sources, see the Reference page Historical prices of precious metals.)