Is Palladium Losing Strength against Gold?



A look at palladium

Palladium has been the weakest among the four precious metals on a YTD (year-to-date) basis. Palladium has seen a YTD fall of 8.7%. The fall in car demand in China may be the reason behind the massive palladium price crash.

Palladium was trading at $987.5 on April 26, 2018. However, there’s been a revival in its price since the beginning of April. Palladium is inclined more toward industrial use than use as a precious metal due to its many industrial applications.

Palladium is heavily used as a catalyst in diesel-based engines. The demand for diesel-fueled vehicles has risen compared to gasoline-fueled vehicles, which gave some support to palladium in 2017.

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The comparative performance of palladium against gold can be measured using the gold-palladium ratio. The ratio measures the number of palladium ounces you need to buy a single ounce of gold. The gold-palladium spread is 1.33. A spread of 1.33 indicates that it requires almost 1.33 ounces of palladium (PALL) to buy a single ounce of gold. The ratio saw a steep fall in 2017 as palladium approached par with gold (GLD). Recently, though, it’s rebounded.

RSI level

The RSI (relative strength index) level of the gold-palladium spread was 25.7 on April 26, indicating that there could be a possible oversold situation and the spread measure could soon rise. A rise in the spread means that palladium could gain strength relative to gold.

Mining companies also closely react to changes in precious metals. The mining companies that have seen downtrends in their prices over the past week are IAMGOLD (IAG), Buenaventura (BVN), Eldorado Gold (EGO), and Alacer Gold (ASR). They have fallen 2.3%, 3.7%, 3.7%, and 1.8%, respectively, as of April 26.

In the next part of this series, we’ll look at the gold-platinum cross rate.


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