Diverging price trends among precious metals

Diverging price trends among precious metals

Precious metals in a downtrend over 2018 is a story of the more obvious. The failing gold rally early in the year and the breakdown of silver leading to a gold/silver ratio now over 86. Platinum is another horror story: longs were lured in a failing rally of this denser precious metal. Yet by mid August, platinum plunged to $767.  Even during the four year gold bear market, platinum had not seen such price level. Today (30 Nov), Platinum again is to close below $800/Oz, making the Gold/Platinum ratio rise to 1.533. Two ounces of gold now buy over three ounces of platinum. 

Diverging price trends: Palladium made another multi year closing high of $1174 on Nov 29, while today Pd was even peaking at $1190 intra-day before profit taking drove the price down again. It probably only is a matter of weeks before palladium will be at parity with gold.
The counter-trend precious metal by excellence however is rhodium. This rarest metal completely ignored the 2016 gold recovery. On the contrary: Rhodium slid below $600/Oz as gold peaked. The difference can't be larger now. An ounce of rhodium buys about two ounces of gold. The rhodium uptrend has been ongoing for over a year, with only minor hick-ups.

1 year rhodium prices.

Palladium peaked by mid January at $1122 only to give back much of its rally gains and meander along $1000/Oz until summer.  Mid August, Pd even dropped below $900, plunging to $842 on Aug 15.  Palladium has been outperforming gold during autumn, leading to its $1190 peak this morning.

The Palladium price has been more correlated with the other precious metals, plunging to a mid August low. Yet the Palladium recovery proved more resilient.

On balance gold slid about $80/Oz over 2018 till end Nov. That's a 6.2% decline.  Silver on the contrary slid 16.3% year-to-date or about 10% more. The Gold/Silver ratio now is reaching a level not seen in several years:

Gold to silver ratio over 2018

The gold-silver ratio made a recovery mid June, when the white metal eased only little while gold was declining. However the trend quickly reversed, only temporarily interrupted late September.

This brings us to the last graph: the gold to platinum ratio, which isn't any better:

Gold to platinum ratio over 2018

The gold-platinum ratio worsened more rapidly than did the gold/sliver ratio. There has been no recovery and when after Halloween there seemed to be some hope for a trend reversal, Platinum again slid beyond compare. On Nov 30, the Gold to Platinum ratio equals the early September peak level.

With the diverging trend between palladium and platinum the price gap between the two metals is reaching grotesque proportions:

Platinum - Palladium price gap

The inverse price gap was narrowing as Palladium declined after its January peak. Platinum reached 'parity' twice for a few days. However the recent palladium rally is coinciding with a further slide of platinum, ultimately closing at $797 on Nov 30. It seems but a matter of days before the inverse price gap will surpass $400. For decades, platinum used to be quite a lot more expensive than palladium.
In a catalytic converter for a common gasoline engine mainly palladium is used, while for the (now less popular) diesel engine more platinum is required. On the other hand, less than 40% of platinum is consumed producing catalytic converters, whereas for palladium that almost amounts to 90%, making the metal a 'one-trick pony' depending on the continued worldwide dominant use of gasoline engines. This makes the current level of the price inversion look absurd.

Who do you think is pulling the leg of the ignorant speculator?


via GIPHY