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Platinum Hits 7-Year Low as Volatility Rises

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Jan. 25 2016, Updated 8:08 a.m. ET

Multiyear lows

Platinum and palladium prices have been weak since the start of the new year, losing 8% and 10.6%, respectively, in January so far. Platinum and palladium prices closed at $819.5 and $499 per ounce, respectively, on January 21, 2016. During the past five trading days, platinum has been the worst-performing precious metal with a loss 1.5%, as the rest of the three precious metals gained. Gold, silver, and palladium rose 2.5%, 2.5%, and 2.3%, respectively, during the same timeframe. Platinum is down to its seven-year low mainly due to the weakness in the market.

Below is a comparative price chart of the Physical Platinum Shares ETF (PPLT) and the Physical Palladium Shares ETF (PALL), which show the movement of the two metals.

[marketrealist-chart id=989444]

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Volatility bounces

The overall volatility in platinum has also been on the rise. On Wednesday, January 20, the implied volatility in platinum stood at almost 24% compared to the 22% during the last trading week. The current trading price of $819.5 is at a 10.7% discount from its 100-day moving average price of $918. Palladium is also trading at a whopping 15.9% from its 100-day moving average price of $593 per ounce.

Further ups and downs in the economic outlook can negatively impact platinum and palladium. Unlike these metals, gold and silver are considered safe-haven assets that may benefit from volatility. Mining companies like Sibanye Gold (SBGL), AngloGold Ashanti (AU), and Gold Fields (GFI) may be positively impacted by a rise in gold and silver.

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