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The Other Stock Market Hedge
While the divergences and WTF charts of the past few weeks may have intrigued many by their unprecedented nature, we thought the correlation between the following three assets was too good to pass off as merely spurious. The last six months have seen the ratio of palladium-to-gold track incredibly closely with the S&P 500. Fundamentally, this may make some sense. As Citi notes, given gold’s strictly limited supply and zero coupon, it had been a major beneficiary in a ZIRP world where easy money seemingly had no end, whereas given its industrial uses, palladium behaves more like a risk asset than a precious metal. Its biggest source of demand stems from gasoline based catalytic converters, hence it is tied to the strength of the US economy/ risk appetite. We bring it up as we suspect this week's equity market behavior may have many concerned that 'bubbles' do exist - no matter what they are told - and perhaps, as a way to hedge the exuberance, buying gold and selling palladium is a less pernicious method than unwinding the entire market all at once.
Charts: Bloomberg
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Aw man, the Palladium bugs are not going to like this article.
It is possible that the above Pd / Au correlation w/ the S&P is a spurious correlation. If you look at enough things, many of them will correlate even if there really is no relation between them. Let's revisit this in a year or two.
no hedge against world's most precious commodity.....time.
I'd be interested to hear any theories on the almost unprecedented strength of the price of palladium vs. that of platinum over the past two or three years. I haven't read, or been able to find, a single article mentioning this unusual recent trend.
I am going to guess that Pd can substitue well for Pt in many applications (but not for diesel engines). If (and I do not know this) the amount of Pd used is about the same as the amount of Pt would be, then my guess might be reasonable -- as the cost would be lower.
In any case, both platinum group metals are for optimists! Rising demand for them is correlated to a growing world economy (more vehicles).
and medicine. Palladium is critical for making dilaudid.
I have yet to see something that doesn't correlate 1:1 with the S&P500 these days. Buy everything
Stawk tunnel vision.
I'm a platinum guy.(best of both worlds)
That's an interesting overlay. Palladium has far fewer (known) uses than XAU. One could argue that XAU availability correlates well with Palladiums 'usefullness', as opposed to ZIRP benefits. ?
understanding palladium - Google Search
Idunno...this palladium/gold vs sp500 is a bit of a far reach...imho
far FAR reach. Looking back even just 3 years it's pretty clear this pattern is meaningless.
I'll give you guys this much, you're thinkin'.
In a million years of trying, I wouldn't have come up with this one.
Sprottie and Richard Rule III are going to be wanting interviews debunking this idea by tonight at midnight - they just launched another fee generator - er - FUND that specializes in platinum/palladium. Seems that their physical gold and physical silver funds are in the process of being redeemed into oblivion.
FWIW, Here's a live futures link.
Stock Futures | World Indices Futures
so interest rates go up, gold goes down?
Interest rates were high in the late 70's and look what happened to gold then. IIRC, they would have to be higher than the real inflation rate to impact gold. Its all manipulation now anyway.
"Its all manipulation now anyway."
Right on Scotty.
What do charts matter when everything is manipulated? They aren't worth the pixels on your screen they were written on.