Platinum Price and Palladium Price Dip Lower than Gold
Johannesburg-Sour Africa (Dec 12) Platinum and palladium prices have been on a determined downward trend for the past year. Platinum has lost 29.7% on a year-to-date basis and closed at $856 an ounce on Thursday, December 10. Palladium was the worst-performing precious metal, dropping 31.9% to close at $543 an ounce. The weakness in the platinum and palladium markets has mostly been a result of the falling gold and silver prices. The precious metals carnage has its roots in the wait for the upcoming Federal Reserve decision on whether to hike interest rates.
A significant measure to use in the analysis of platinum and palladium prices is the gold-platinum and gold-palladium spread. The gold-platinum spread represents the number of platinum ounces per one ounce of gold. The current spread is at $1.25, which indicates that we need 1.25 ounces of platinum to buy one ounce of gold. If you’re long on the spread, you’re optimistic about gold because you’ll profit if the spread rises further.
Similarly, the gold-palladium spread represents the number of palladium ounces per one ounce of gold. The spread is at $1.98, meaning that we need almost two ounces of palladium to buy one ounce of gold.
The spread measures have witnessed a rise due to the deteriorating prices of platinum and palladium as compared to gold. The falling prices of platinum and palladium are due to the lack of buying potential in the markets, which seem to be waiting for the Fed meeting in the coming week.
The mining-based companies that are affected by the fall in precious metals prices include New Gold (NGD), Newmont Mining (NEM), and Aurico Gold (AUQ). These three companies together make up 8.4% of the price changes in the Market Vectors Gold Miners ETF (GDX). Another ETF that has been adversely affected this year is the Proshares Ultra Silver (AGQ).