Silver vs Palladium – Update
On January 25th, I wrote the following:
The correlation between silver and palladium has been quite high, since both are precious metals having a great industrial demand. However, the last couple of days this correlation broke. Is silver due to rise again, or is palladium due to fall?
I think it is because silver is more linked to the price of gold, while palladium prices remain high because the stockmarket does… If the stock markets begin to fall, we might see palladium drop.
You can read this article here…
Well, what do we see now? Silver picked up steam the last couple of days, and is now trading back at a level where it should be trading compared to Palladium. In cases like these, I knew what I had to do if I were a big hedge fund: long silver and short palladium. Even though palladium didn´t decline, the long position in silver would have made substantial gains. The “Commodity Pricing Risk” would be almost zero, so it would be a huge potential reward for very low risk.
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