Chinese market slump
The current 2016 rout in precious metals is most visible in platinum and palladium. Both these metals have seen significant drops in 2016.
Platinum and palladium prices have fallen 5.2% and 14%, respectively, on a year-to-date basis. The 4.7% rise in vehicle sales in China has also been the lowest growth in almost three years. Lowered sales and the economic slump in China have weighed on platinum’s price, which has fallen about 1.9% during the past five trading days. Platinum is used in the catalytic converters that help to curb the harmful emissions in diesel-based cars.
Platinum futures prices touched a low of $831 on Tuesday, January 12, 2016. The current trading range for platinum is the most depressed it has been in almost seven years.
The trailing-five-day average volatility of platinum is close to 23.9, which is significantly higher than the volatility observed in gold’s price. The current gold-platinum spread is trading at 0.28, which is also greater than the 1.2 figure seen during the end of 2015.
The cross-commodity gold-platinum rate signifies the number of platinum ounces it takes to buy a single ounce of gold. A rise in the rate stands for the growing strength of gold compared to platinum.
Platinum’s RSI (relative strength index) is at 61 as of January 13. A value of above 70 signifies a pullback, and value of below 30 determines relative undervaluation. The figure has risen from a level of 36 seen during December’s end.
The fall in precious metals has caused mining stocks such as AngloGold Ashanti (AU), Alacer Gold (ASR), and Newmont Mining (NEM) to become volatile as well. The VanEck Vectors Gold Miners ETF (GDX) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) fell 4.5% and 7.2%, respectively, during past five trading days.