Reading the Gold-Palladium Ratio



Palladium is the strongest

Whereas palladium has been the strongest among the four precious metals over the last month, it has fallen 7.2% year-to-date, possibly due lower car demand in China. Palladium was trading at $1,002 on May 10, while gold was trading at $1,321. Like silver, palladium often leans more toward its industrial use than its precious-metal status. Palladium, which is used as a catalyst in diesel engines, was supported by demand for diesel vehicles rising in 2017.

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Gold’s and palladium’s relationship can be assessed using the gold-palladium ratio, which measures the number of palladium ounces you need to buy a single ounce of gold. The gold-palladium spread is 1.3, indicating that it requires almost ~1.3 ounces of palladium (PALL) to buy an ounce of gold. The ratio fell steeply in 2017 as palladium approached par with gold (GLD).

Relative strength index

The gold-palladium spread’s RSI (relative strength index) score rose to 57.2 on May 10, suggesting that palladium could gain strength.

Mining companies react to changes in precious metals. Last week, miners IAMGOLD (IAG), Coeur Mining (CDE), Pan American Silver (PAAS), and Alacer Gold (ASR) rose 10.5%, 5%, 9.1%, and 10.7%, respectively. In the next part of this series, we’ll look at the gold-platinum ratio.


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