Market Overview

7 December 2021

Palladium Is Taking a Break After a Plunge

Palladium is not just a risky asset that is closely following the negative and positive news, but it is also an industrial metal that is widely used in the automobile industry to produce catalysers for combustion engines. While the industry has been suffering in recent months due to decreases in the demand and supply chain disruption, palladium output went up by more than 500,000 ounces this year alone as production recovered in South America.

This forced palladium prices to drop from their peak at $3000 per ounce in May to $1700 in November. However, an upside spike of the price may be seen in December after a panic sell-off amid the global spread of the new coronavirus omicron variant.

This week pushed prices to $1880 per ounce as the risk on the investment means used to buy risky asets like stocks and oil has been dominating the market. Palladium prices are seen to be stabilising around the $1880 level, which a serious upward resistance level. Such developments may indicate a correction rather than a reversal of the downward trend. Technically this correction may push prices to the $1900 per ounce level, or even to $1962. These levels are sitting at the strong resistance levels, at October lows and the Fibonacci retracement levels of 38.2% and 50% corrections to the last impulse on the daily timeframe chart.

The end of the correction may define a new price target at $1700-1800 per ounce.

However, according to the Russian Nornickel, one of the largest global palladium producers, the market may experience a deficit of 300,000 ounces in 2022. However, the supply chain disruptions and the lack of microchips required for vehicle manufacturing will probably run over to next year and continue a downturn on the supply side. However, this downturn may be less severe than it was this year as Asian-based companies are gradually expending their production capacities and improving supplies. So, the decline of palladium prices may continue in 2022. But it may be worth noting that palladium prices were averaging at $1400 per ounce for the most of 2019.

 

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Mark Goichmann
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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