What’s Driving the Platinum and Palladium Markets?



Platinum and palladium markets

As platinum and palladium are used in emission-curbing autocatalysts, the demand for autocatalysts impacts the price direction of these metals. Platinum has risen approximately 9.4% YTD (year-to-date). Palladium had erased its losses from 2015, but has fallen 4.1% YTD.

The last month has adversely impacted palladium, which has fallen approximately 9.2%. Platinum has fallen 7%. The beginning of the year remained slow for palladium. This is likely due to industrial appeal rather than to precious metal appeal.

The volatility in palladium is close to 31.6%, making it the most volatile of the four precious metals.

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Cross-commodity rates

The relative movement in platinum and palladium can be studied through cross-commodity rates. The gold-platinum and gold-palladium spreads measure the number of platinum and palladium ounces it takes to buy one ounce of gold, respectively. These spreads were narrowing in April. Currently, they’re widening. This suggests that gold is getting stronger than platinum and palladium. The gold-platinum and gold-palladium spreads were at 1.3 and 2.4, respectively, on May 16, 2016.

The fluctuations in platinum and palladium are reflected in funds such as the the ETFS Physical Platinum Shares (PPLT) and the ETFS Physical Palladium Shares (PALL). These two funds have fallen 7.3% and 9.8%, respectively, on a trailing-30-day basis.

Mining shares that have fallen over the last five trading days include AuRico Gold (AUQ), Silver Wheaton (SLW), and Yamana Gold (AUY). They have fallen 4.5%, 2.3%, and 3.4%, respectively. Together, they account for ~9.7% of the VanEck Vectors Gold Miners ETF (GDX).

In the next part of this series, we’ll look at the correlation of mining stocks to gold.


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