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A Brief Look at December 2017’s Precious Metal Spread Measures

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Spread analysis

When we analyze precious metals and their relative price movements, we should also briefly analyze the spread readings of these metals. Gold is the most crucial of the precious metals; spread readings often include gold as the base.

In this article, we’ll discuss the gold-silver, gold-platinum, and gold-palladium spreads. These three spreads stand at 77.9, 1.38, and 1.23, respectively.

A gold-silver spread of 77.9 means that it takes ~77.9 ounces, or almost 78 ounces, of silver to buy a single ounce of gold. Similarly, nearly 1.4 ounces of platinum equal one gold ounce, and 1.2 ounces of palladium equal one gold ounce.

The chart above shows the performance of the gold-silver spread over the past two years. The fall of the spread in mid-2016 indicates silver’s comparative strength against gold. A rise in the spread means that gold is becoming relatively strong compared to silver, platinum, and palladium, respectively.

The gold-palladium spread moved from ~1.3 in November to 1.2 in December. This movement suggests that palladium has gained more strength in its price compared to gold. This relative strength is evident in palladium’s whopping YTD (year-to-date) rise of 50% and gold’s marginal 9% rise in comparison.

RSI reading

The RSI (relative strength index) levels of the gold-silver, gold-platinum, and gold-palladium spreads are 61, 58, and 43, respectively. An RSI level of above 70 indicates a fall in price, while an RSI level of below 30 indicates a probable rise in price.

Among the mining funds that closely track precious metals are the iShares Gold Trust ETF (IAU), the iShares Silver Trust ETF (SLV), the ETFS Physical Platinum Shares (PPLT), and the ETFS Physical Palladium Shares (PALL). They’ve seen YTD (year-to-date) rises of 9.3%, 0.73%, 0.42%, and 49.1%, respectively.

The mining shares that also have witnessed YTD rises are Gold Fields (GFI), IAMGOLD (IAG), Compañía de Minas Buenaventura (BVN), and Pan American Silver (PAAS).

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