rounded corner
rounded corner
top border

Palladium Beats Platinum for the First Time in 16 Years


Bookmark and Share
At the end of September, the price of palladium became higher than the price of platinum. What does it mean for the precious metals market?

Initially, we wanted to provide investors with an update on Catalonia, but Catalan President Carles Puigdemont rescheduled the session of the Catalan Parliament for today. We will cover the developments in Spain in tomorrows Gold News Monitor, while today we focus on the historical development in the precious metals market.

On September 28, palladium prices moved above those for platinum for the first time since 2001, as one can see in the chart below. Yesterday, platinum cost $911 per ounce, about $11 less than palladium.

Chart 1: Palladium-to-platinum ratio over the last ten years.
 Palladium to platinum ratio

For some analysts it was a surprise, but not for us. In the August edition ofthe Market Overview , we argued that given the demise of diesel vehicles, platinum was likely to continue its underperformance relative to other precious metals. We did not believe in the rebound in platinum prices, so we wrote:

investors should not count on platinum prices rebounding and jumping above the price of gold again. Actually, the price of platinum may reach parity with palladium soon, which is mainly used in gasoline vehicles, or even decline below the price of its cousin.

It turns out that we were right, contrary to those who called for mean reversion, i.e. that the spread between metals would eventually recover towards the long-term mean. However, the concept of the long-term mean is meaningless in a dynamic world. As a reminder, there is structural change ongoing in the automotive sector (the demise of diesel technology and the electric revolution). Thus, although platinum could eventually recover somewhat, we seriously doubt whether it would regain its status of rich mans gold. The ratios of platinum to gold or to palladium are not set in stone. The historical averages are useless as investors are forward-looking.

Just to be clear: we are not excluding a correction in the palladium prices. The metal has risen over 35 percent this year and there is the large bullish position of speculators in palladium futures, so there indeed might be too much heat in that market. However, what we are saying is that it is not something certain, as there is no predetermined spread between palladium and platinum. And the correction in palladium would not have to translate into platinums strength. In other words, we are just pointing out that there are important fundamental reasons which seem to be neglected by the investors, but which may justify the current price developments in the precious metals market. Stay tuned!

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If youre not ready to subscribe yet and are not on our mailing list yet, we urge you tojoin our gold newsletter today . Its free and if you dont like it, you can easily unsubscribe.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits Gold News Monitor and Market Overview Editor


Recent articles from this author



About the author


Arkadiusz Sieron is a certified Investment Adviser. He is a long-time precious metals market enthusiast, currently a Ph.D. candidate, dissertation on the redistributive effects of monetary inflation (Cantillon effects). Arkadiusz is a free market advocate who believes in the power of peaceful and voluntary cooperation of people. He is an economist and board member at the Polish Mises Institute think tank. He is also a Laureate of the 6th International Vernon Smith Prize. Arkadiusz is the author of Sunshine Profits’ monthly Market Overview report and daily Gold News Monitors, in which he keeps subscribers up-to-date regarding key fundamental developments affecting the gold market and helps them prepare for the major changes.

Published by Barchart
Home  •  Charts & Quotes  •  Commentary  •  Authors  •  Education  •  Broker Search  •  Trading Tools  •  Help  •  Contact  •  Advertise With Us  •  Commodities
Markets: Currencies  •   Energies  •   Financials  •   Grains  •   Indices  •   Meats  •   Metals  •   Softs

The information contained on InsideFutures.com is believed to be accurate but is not guaranteed. Market data is furnished on an exchange delayed basis by Barchart.com. Data transmission or omissions shall not be made the basis for any claim, demand or cause for action. No information on the site, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any futures or options contracts. InsideFutures.com is not a broker, nor does it have an affiliation with any broker.


Copyright ©2005-2017 InsideFutures.com, a Barchart.com product. All rights reserved.

About Us  •   Sitemap  •   Legal  •   Privacy Statement