PGM performance 2016
PGMs (platinum group metals) including platinum and palladium have strengthened in the second quarter of 2016 as compared to the first quarter of 2016. Still, they have remained weaker than gold, which we can attribute mainly to the lack of investor interest in PGMs compared to gold and silver. But the overall sentiment toward the precious metal market has remained strong, which helps explain why they have generally buoyed in 2016.
Analysts are expecting a continued upside for these metals in the third quarter, driven by autocatalyst demand. For platinum, autocatalyst demand makes up about 40% of the total platinum demand, whereas for palladium, autocatalyst demand makes up about 75% of the total palladium demand.
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Platinum versus palladium
The above chart shows how the risk sentiment in the market plays well for precious metals. Platinum and palladium have already risen 16.3% and 17.1% so far in 2016, thought the rally in palladium was comparatively slower in the first two months of 2016.
Also, the call implied volatility for palladium is more than it is for platinum. The call implied volatility as of September 13, 2016, was 27.7% for palladium and 22.8% platinum.
Mining companies that plummeted
Mining shares that fell during the past month include AngloGold Ashanti (AU), Hecla Mining (HL), Eldorado Gold (EGO), and Kinross Gold (KGC). These four companies saw their prices fall 28.8%, 22.8%, 13.4%, and 22.8%, respectively, on a 30-day trailing basis. Combined, these four companies make up about 13% of the fluctuations in the Vaneck Vectors Gold Miners Fund (GDX).
Now let’s discuss platinum deficits and key drivers.