Insights into the Platinum and Palladium Markets

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Insights into the Platinum and Palladium Markets PART 1 OF 4

Platinum and Palladium Markets Stay Volatile in 2016

Precious metal movements

Precious metals have been highly volatile in 2016. The unrest in the markets has buoyed precious metals as a haven investment. Gold and silver skyrocketed in the first quarter while platinum and palladium maintained a comparatively slower pace.

Gold and silver have increased by about 17.1% and 17.4%, respectively, year-to-date. Platinum’s pace has been slower and increased by only 13%. Palladium, however, has lost 2.7%.

Platinum and Palladium Markets Stay Volatile in 2016

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Since the beginning of the year, palladium has tracked closer to the equity markets than precious metals. As palladium is extensively used as an industrial metal, it closely followed equities on their downward trend.

Platinum and palladium recovered in February and March after slight losses in January. On Monday, May 23, 2016, platinum closed at $994.80 per ounce and palladium closed at $530.00 per ounce.

Technical indicators

Although platinum and palladium are often strongly correlated with each other, there were some discrepancies in their correlation in 2016. The RSI (relative strength index) measures the relative overvaluation or undervaluation of an asset.

The RSIs for platinum and palladium are 41 and 30, respectively. An RSI reading below 30 indicates undervaluation and an upward revision in price. An RSI above 70 indicates overvaluation and that a fall in price could be expected.

Price fluctuations in precious metals can also bring about changes in their respective mining stocks and funds. Among the funds that track platinum and palladium, the ETFS Physical Platinum ETF (PPLT) and the ETFS Physical Palladium ETF (PALL) have lost 3.3% and 7.5%, respectively, on a 30-day trailing basis.

Some of the mining stocks that have fallen due to the fall in these metals include AngloGold Ashanti (AU), RandGold Resources (GOLD), and Sibanye Gold (SBGL). These three companies experienced a fall in their share prices of 4.2%, 7.2%, and 14.3%, respectively, during the same timeframe. Together, these three companies comprise 11.7% of the VanEck Gold Miners ETF (GDX).


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