Understanding the Mid-June Gold-Platinum Spread
Platinum in diesel-based vehicles
While palladium is extensively used as a catalyst in gasoline-based cars, platinum is used in diesel-based engines. Market demand for diesel-based vehicles plays a major role in determining the fundamentals for platinum.
But while platinum is famous as a precious metal, it also has industrial uses and can thus closely react to overall market sentiment. Notably, platinum and palladium have surged 2.9% and 8.1%, respectively, over the past 30 trading days.
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The dollar is also influential in the price changes of platinum and has affected the fluctuations of platinum-group metals like platinum and palladium.
The gold-platinum spread
The demand for platinum has been weak over the past few years, and speculations about lower sales forecasts of diesel-based vehicles could further impact platinum. Platinum has fallen ~60% from its 2008 peak price.
When we analyze the platinum market, it’s crucial to check out the gold-platinum spread or ratio. The ratio is a measurement of the number of platinum ounces it takes to buy a single ounce of gold. The higher the ratio surges, the weaker platinum (PPLT) becomes as compared to gold (SGOL), because more ounces of platinum are needed to buy a single ounce of gold.
The gold-platinum spread was ~1.3 on June 12, 2017. The RSI level for gold-platinum spread is now 56.8.