Is Palladium the New Gold?

01/01/2013 7:00 am EST

Focus: COMMODITIES

Although, gold and silver prices have been stagnant in recent weeks, their less-glamorous sister, palladium, has been turning in a sparkling performance, according to the staff at ProfitTimes.

You all know by now that there’s a huge battle going on in Palladium… The battle of $700.

Since there have been quite a lot of speculators entering the palladium market recently, a quite significant drop cannot be ruled out over the next couple of days. However, I think that palladium will break through the $700 level sooner rather than later.

I will not go into detail again about this topic right now. Just read the previous posts, and you will know why.
No, what I will tell you now, is something that could be even more promising for palladium going forward.

Recently, gold and silver have been weak, to say the least. Palladium on the other hand, has been surging non-stop since the end of October, from below $600 to just below $700 at the moment. Palladium has outperformed gold recently.

This can be seen in the weekly chart below, which plots the Palladium price divided by the gold price. A rising ratio means palladium outperforms gold. We can see that the ratio recently broke out above the red resistance line, meaning the downtrend has stopped.

Since the RSI is far from being overbought on a weekly basis, there is plenty of room to the upside.

chart
Click to Enlarge

When we then look at the monthly chart, we can also see a breakout above the red resistance line, just like in 1996-1997.

The MACD is about to make a positive crossover, and the RSI is showing a similar setup as in 1997. From 1997 to 2001, the ratio rose from 0.35 to 4! At some point, palladium was four times more expensive as the price of gold.

chart
Click to Enlarge

Since we now have a breakout on both the weekly and monthly charts, this could imply that a new uptrend has begun.

If we would get back to the level last seen in 2011 (0.60), that would mean palladium prices at roughly $1,000, given that gold would remain stable around $1666 (currently at $1,669). You can do the math if gold rises, AND the ratio would go to 0.60.

Assume a gold price of $2,000 and a ratio of 0.60… That would give $1,200 palladium!

I even think there is a distinct possibility that we will see the ratio go up to 1.00 over the next couple of months…do the math.

Once the “big players” notice the fact that palladium will likely outperform gold, the market (price) will take care of the rest.

By the staff at ProfitTimes

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