Among the four precious metals, palladium has shown the strongest performance, and its market fundamentals are upward scaling. The chronic deficits of the palladium market are a major determinant in its upward price movement.
Palladium had seen a year-to-date rise of 9.9%, which is higher than the rise in platinum, silver, and gold on January 11, 2017. In 2016, palladium was underperforming its precious metal peers, but now it’s outperforming them.
The chart above shows gold’s performance compared to palladium according to 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 because more ounces of palladium are needed to buy an ounce of gold.
The gold-palladium spread has seen its ups and downs over the past few months. However, the Brexit vote in June 2016 resulted in some strength for palladium, which was evident in falling cross-commodity rates.
Once again, palladium is overtaking gold. The spread fell substantially during the last quarter of 2016. Palladium managed to dodge the recent fall in precious metals, which explains the fall in the spread. A rise in the gold-palladium spread indicates strength for gold, while a fall indicates strength for palladium.
The gold-platinum spread was approximately 1.6 on January 11, 2017. Its RSI (relative strength index) was as low as 40. 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 Shares ETF (PALL) and the VanEck Merk Gold ETF (OUNZ). Precious metal mining companies that have fallen in the past month include Alacer Gold (ASR), Gold Fields (GFI), Sibanye Gold (SBGL), and Harmony Gold Mining (HMY).