What’s Affecting the Gold-Palladium Spread?



Gold-palladium ratio

Palladium has seen a year-to-date rise of 24.9%, which is higher than the increase in platinum, silver, and gold. Earlier, palladium had been underperforming its precious metal peers, but it’s now outperforming them. In the past 30 trading days, palladium has risen 8.4%, while the other three precious metals have seen losses.

The below graph shows gold’s performance compared to palladium’s by way of the gold-palladium spread, or the gold-palladium ratio. The spread measures the number of palladium ounces it takes to buy a single ounce of gold. The higher the ratio, the weaker palladium is compared to gold, as more ounces of palladium are needed to buy a single ounce of gold.

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Spread movements

The gold-palladium spread has seen its ups and downs over the past few months. But the United Kingdom’s Brexit vote resulted in some strength for palladium, which was evident in falling cross-commodity rates.

Once again, palladium is overtaking gold. The spread fell substantially after July 2016. Also, palladium managed to dodge the recent tumble in precious metals, which explains the drop in the spread. A rise in the gold-palladium spread indicates strength for gold, while a fall indicates strength for palladium.

RSI levels

The gold-platinum spread was approximately 1.7 on November 14, 2016. Its RSI (relative strength index) was as low as 27. An RSI level above 70 indicates that an asset has been overbought and could fall. An RSI level below 30 indicates that an asset has been oversold and could rise.

Fluctuations in these precious metals are closely reflected in funds such as the ETFS Physical Palladium (PALL) and the VanEck Merk Gold ETF (OUNZ). The precious metal mining companies that have fallen in the past month include IAMGOLD (IAG), Alamos Gold (AGI), Sibanye Gold (SBGL), and Harmony Gold Mining (HMY).


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