Palladium price’s performance in recent months has been rather underwhelming compared to the other precious metals. Notably, the shift to platinum is the leading driver of the divergence. In the immediate term, it is getting support from the market’s focus on US CPI data following mixed feelings from Friday’s jobs report.
Reasons for palladium’s underwhelming performance
In early October 2022, palladium price was trading above $2,300. At the same time, platinum price was at $859. Seven months later and platinum futures are at $1,074.00 as at the time of writing. Palladium has taken a different trend; dropping to $1,522.50.
The other two precious metals , gold and silver have also recorded significant gains in recent months. Indeed, gold price hit a fresh record high last week while silver was at a one-year high on Friday.
Palladium price’s unique trend is largely due to the shift in interest to platinum. Both metals are used in catalytic converters. However, platinum’s demand has increased due to the fact that it is cheaper.
Platinum’s availability has also contributed to the shift and subsequent decline in palladium price. On the one hand, Russia is the leading producer of palladium. In comparison, the amounts of platinum in countries like South Africa, the UK, and the US surpass that in Russia. Following the Russia-Ukraine war, platinum has gained more popularity. Granted, supply concerns over both metals remains at play.
However, in the immediate term, investors’ focus is on the US CPI data set for release on Wednesday. After the strong US jobs report, signs that inflation remains high may renew a hawkish bias for the Fed. At the same time, ECB’s hawkish tone and firmer US equities are weighing on the US dollar while boosting precious metals.
Palladium price forecast
Palladium price has been on a downtrend for months now. In fact, the bearish trend has been on since March 2022. In 2023 alone, it has been down by over 15% year-to-date. More recently, the gains made in the first half of April 2023 were reversed as at Wednesday last week.
Granted, the precious metal has been on a rebound over the past three sessions. On Monday, it hit a one-week high at 1,530.43. As seen on its daily chart, it has extended gains from late last week to trade above the 25 and 50-day EMAs.
Even so, the bulls are far from reversing the months-long bearish trend. Indeed, I remain bearish on palladium price despite the recent rebounding.
For instance, the formation of a broadening wedge pattern signals palladium price may remain under pressure in the short term. The two diverging trend lines highlighted in black highlight the metal’s probable range in the ensuing sessions.
On the lower side, palladium price has likely hit its short-term bottom at last week’s low of 1,421.20. More particularly, the highlighted trend line will be a support zone worth watching.
On the upside, further rebounding may face resistance along the upper trend line. The subsequent formation of the bearish double top pattern will likely lead to the reversal of prior gains.