Ratios and discounts between key precious metal futures have widened to multi-year levels in recent weeks, suggesting that that under-performing metals may soon recover, analysts with German precious metals refiner Heraeus said Monday.
Looking at the ratio between gold and silver prices, Heraeus analysts noted that the ratio of gold to silver prices had widened to 82:1 in recent weeks, the widest level in seven years.
COMEX gold for April delivery closed Monday $14/oz higher at $1,234.40/oz, while COMEX silver prices for May delivery gained $0.204/oz to close at $14.918/oz.
Last week, COMEX silver prices fell nearly 4.5%, while COMEX gold prices fell only 0.8%
"Considering the long-term average of the ratio at around [58:1], a recovery against gold seems likely," Heraeus analysts said, pegging nearby support for silver at $14.670/oz.
Similarly, the difference between platinum and gold prices has widened to record levels, Heraeus analysts said.
NYMEX platinum for April delivery surged $19.20/oz Monday to close at $934.30/oz, a discount of nearly $300/oz to COMEX April gold at $1,234.40/oz.
Last week, April platinum prices fell 3.2% compared with April gold's decline of 0.8%.
"A slight increase in physical demand was recorded [last week], but despite the low prices, its sustainability is doubtful," Heraeus analysts said, putting nearby buying support for April platinum at $909 and $890.
Similar activity was seen last week in platinum and palladium prices. NYMEX palladium for June delivery fell nearly 3.5% last week to close at $482.45/oz compared with April platinum at $915.10/oz.
The resulting ratio of 1.89:1 is the highest since March 2014. "As we expected last week, palladium could not defend the $500 mark and moved to its low at $478/oz on Thursday night," Heraeus analysts said.
"Nevertheless, we believe that the weaker prices only represented a correction and that in the long run we will see higher prices again," they added, referring to an expected demand increase from the automotive sector.
Gasoline-powered vehicles driven in the US and China use mostly palladium in their catalytic converters to control greenhouse gas emissions. Diesel-powered vehicles driven in Europe use mostly platinum in their catalytic converters.
