Palladium Recovers but Remains the Least Precious Performer



Palladium, the worst performing precious

Palladium has seen prices crash over the past two years. From the mark of $826 per ounce at the start of 2015, it has retreated to almost $550 as of February 19, 2016. This slump in palladium’s price represents the largest among other the precious metals, platinum, gold, and silver.

But the recent surge in precious metals in 2016 was extended from the recent unrest in China, which has spread to other countries. Concerns over the US Federal Reserve’s decision to raise interest rates—and to delay further hikes—have also added to the volatile prices of precious metals so far in 2016. But the recent dip in the US dollar index has given an additional boost to these dollar-denominated assets.

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Technical indicators

Palladium futures for March expiry were trading at $499 per ounce as of Friday, February 19. Future prices were trading at a 13.1% discount from the 100-day moving average price of $575 per ounce. The RSI (relative strength indicator) for palladium is at 42, and we should note that although a figure above 70 indicates overvaluation, below 30 indicates undervaluation. This means that palladium has been volatile compared to its precious metal counterparts, with a volatility close to 35%. Notably, palladium has actually lost about 11% in value since the beginning of 2016.

Mining equities

The changes in this precious metal can also be tracked by way of investments in the broader exchange-traded funds that take their prices from palladium. The Physical Platinum Shares (PALL) ETF, for example, has also lost close to 11% YTD (year-to-date).

However, as the other precious metals have performed well YTD, most mining companies have gained reasonable returns so far in 2016. Stocks like New Gold (NGD), AngloGold Ashanti (AU) and Franco-Nevada (FNV) have increased by a whopping 52.8%, 35.1%, and 34.7% respectively, in the past one-month period. These three mining equities together contribute 11.6% to the price changes in the VanEck Vectors Gold Miners ETF (GDX), which has increased by 42.4% during the same period.

Now let’s examine the status of car sales and how this could affect platinum and palladium.


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