Palladium had a dramatic start to the week as prices plummeted by 13% to $2061 per ounce on Monday. Prices were at $2500-2530 in the middle of April. Fears over unprecedented pandemic lockdowns in China caused demand for industrial metals, including palladium, to dive. Falling equities and other risky assets has contributed to the decline, along with the expected tightening of the monetary policy of the Federal Reserve (Fed), that is expected to announce another sharp interest rate hike next week and may continue to do so after every meeting this year. This may curb investments in production, lower corporate profits and, consequently, the demand for basic materials.
Palladium is primarily used in car production, which is highly sensitive to uninterrupted supplies of multiple components. Chinese car manufacturing is a prominent industry which produces spare parts for most countries around the world. Thus, the reaction of palladium prices on Chinese lockdowns was swift and dramatic.
Technically, palladium prices hit a strong support level at $2027, or March lows. This level was defended successfully by the bulls and prices recovered to $2122 per ounce. Prices may stabilise within a range of $2027-2050 per ounce, which is justified by the existing drivers. Once the lockdowns in China are removed, good buy opportunities towards the upper margin of this range may emerge.
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