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Did Sales Growth in Europe Help Platinum and Palladium?

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Mar. 22 2016, Published 9:27 a.m. ET

Palladium outperforms

The effects from the FOMC (Federal Reserve Open Market Committee) meeting during mid-March were felt by precious metals on March 17. All of the precious metals rose sharply. On March 18, gold, silver, and platinum fell 0.85%, 1.4%, and 1.9%, respectively. Palladium was the only precious metal that rose on March 18. It gained 3.5%.

Palladium has been the best performer during the past 30 days. It earned about 18%—significantly higher than the gains in the other three precious metals. Platinum and palladium saw a year-to-date gain of 8.5% and 4.9%, respectively.

Although most of the metals had a down day on March 18, mining-based shares including the Global X Silver Miners ETF (SIL) and the VanEck Vectors Junior Gold Miners (GDXJ) both rose by 0.77% and 2.2%, respectively.

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European demand

The most crucial elements buoying platinum are the auto demand and ongoing production deficits. The sector is a significant determinant of the price changes in platinum and palladium. In  February, new car sales rose by 14% in the European Union. Volkswagen was entangled in the emissions scandal in 2015. It underperformed its competitors in 2016 as well. The scandal had a significant impact on platinum and palladium prices during the end of September 2015.

The upside in precious metals helped metal mining stocks like AngloGold Ashanti (AU), Randgold Resources (GOLD), and Primero Mining (PPP). These three companies rose by 24.8%, 2.9%, and 34.5%, respectively. Together, these three stocks account for 10% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).

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