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Analyzing Precious Metals: Platinum Falls and Palladium Rises

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Platinum is the lowest since 2009

Platinum fell to its lowest level since June 2009. It fell 0.57% and closed at $932 per ounce on Wednesday, September 23, 2015. However, palladium rose a whopping 5.70% and closed at $645 per ounce. Platinum prices have been falling steadily since 2011. They’re down more than 50% from an all-time high of $1,912.20 in mid-2011. The falling prices are due to oversupply and patchy auto sales. Platinum and palladium lost ~21% and 17% of their prices on a YTD (year-to-date) basis. However, gold and silver buoyed. They have lost ~2.80% and 3.20%, respectively.

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Volkswagen scandal

Volkswagen applied software in its diesel-powered vehicles that would cheat on the US emissions test. The scandal most likely rattled the precious metals. It stirred a debate about the possible impact on the future demand for emissions control technology. The exhaust filters have a higher platinum content in diesel-powered cars. They have a higher palladium content in gasoline-powered vehicles. It’s important to remember that platinum and palladium prices primarily rely on the emissions control technology known as “autocatalysts.” A significant chunk of the demand for these metals is determined by autocatalysts. Therefore, the Volkswagen emissions scandal resulted in a sharp fall in platinum demand on Wednesday, September 23. As a result, it caused a rally in palladium prices by boosting its use.

The adverse diesel publicity may spur buyers to favor gasoline vehicles. This would benefit palladium because the metal is mostly utilized in gasoline engines. Palladium rose as much as 6.80% on Wednesday and touched a high of $651 per ounce.

Other precious metals and miners

Gold also rose after two days of losses. The dollar fell as much as 0.20% against a basket of leading currencies. Gold rose by about 0.60% on Wednesday and closed at $1,131.50 per ounce. Silver rose by 0.22% and closed at $14.78 per ounce.

ETF investments like the Global X Silver Miners (SIL) and Global X Uranium ETF (URA) lost close to 27% and 36%, respectively. The mining equity stocks that took the biggest fall as of September 23 are AngloGold Ashanti (AU), New Gold (NGD), and First Majestic Silver (AG). Together, these three stocks account for ~7.30% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).

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