Among the four precious metals, palladium has shown the strongest performance, and its market fundamentals are upward scaling. The chronic deficits of the palladium market are a major determinant in its upward price movement.
Palladium had seen a year-to-date rise of 9.9%, which is higher than the rise in platinum, silver, and gold on January 11, 2017. In 2016, palladium was underperforming its precious metal peers, but now it’s outperforming them.
A ‘spread’ measures the number of palladium ounces it takes to buy a single ounce of gold. The higher the ratio, the weaker palladium is compared to gold because more ounces of palladium are needed to buy an ounce of gold.
The gold-palladium spread has seen its ups and downs over the past few months. However, the Brexit vote in June 2016 resulted in some strength for palladium, which was evident in falling cross-commodity rates.
Once again, palladium is overtaking gold. The spread fell substantially during the last quarter of 2016. Palladium managed to dodge the recent fall in precious metals, which explains the fall in the spread. A rise in the gold-palladium spread indicates strength for gold, while a fall indicates strength for palladium.
Source: Market Realist