Why Did Palladium Surge Over the Last 5 Days?



11% gain for palladium

Palladium led the precious metals on Thursday, March 3, 2016, with palladium futures for June expiration rising a whopping 5.2%. After touching a high of $544.20, palladium settled at $542.20 per ounce—the highest close palladium has seen in about a month. The call implied volatility, which measures the changes in the price of the option with respect to the changes in the price of an asset or stock, rose to 32% on Thursday.

Palladium has risen about 11% during the past five trading days, compensating for the losses seen in previous days. The recent surge in palladium came along with the rise in the global stock markets and the crude oil recovery. Asian stocks touched a two-month high on Thursday.

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Technical indicators

Palladium has been reacting more as an industrial metal than as a precious metal since the beginning of the year. It has been following Market trends rather than precious market trends. Palladium is trading at a discount of 2.9% to its 100-day moving average price, which may mean there is room for growth. The RSI (relative strength index) is at 67. A RSI reading above 70 indicates overvaluation, whereas a level below 30 indicates undervaluation.

The price changes in palladium can also be tracked with the Physical Palladium Shares (PALL). Palladium remains the worst-performing precious metal in 2016, having fallen almost 4.8% on a YTD (year-to-date) basis.

Other funds that closely follow changes in the precious metals include the iShares Gold Trust (IAU). This indicator follows the price movement of gold and has risen about 19% on a YTD basis. The mining-based stocks that have performed the best over the past month include Harmony Gold Mining Company (HMY), Royal Gold (RGLD), and AngloGold Ashanti (AU).


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