Has Palladium hit rock bottom?
Palladium is currently trading at USD 1,974/t.oz, a 13-month low for the soft silver-white mineral. In August 2020, Palladium was trading at such a price before it shot up within a hair’s width of USD 3,000/t.oz.
The metal’s current price is sitting snugly between two weak touchstone levels. Over the coming trading week, we could see Palladium claw itself back up to USD 2,200/t.oz, rejecting prices as low as USD 2,000/t.oz but remain suppressed from current levels or break lower into a pocket between USD 2,000/t.oz and USD 1,760/t.oz.
Which of these three is most likely? Evidence suggests it could be the third scenario due to global supply constraints weakening demand for Palladium.
Does Palladium have the capacity to fall further?
In the short term, it seems likely. Palladium’s principal use is in catalytic converters of automobiles. Car manufacturers are experiencing supply chain bottlenecks (chiefly related to silicon chips), severely hampering their ability to deliver a typical number of new cars. Naturally, the need for catalytic converters has declined hand-in-hand with the decline seen in production capacity.
How long will the bottleneck in auto manufacturers’ supply chain last?
The bottlenecks are expected to get worse before they get better. This is one short-term factor working in opposition to palladium prices.
According to Intel (NASDAQ: INTC) CEO Pat Gelsinger, it might be two years before silicon chip shortages are overcome. Likewise, BMW’s (ETR: BMW) CEO, Oliver Zipse, sees chips being in short supply for at least the next 6-12 months.
85% of Palladium that is mined ends up in catalytic converters. As such, the mineral is heavily dependent on the automobile industry for its pricing. It might not be until the point in time that car production is ramped up, that the price of Palladium will find higher and more definitive levels of support. Palladium’s supply-demand ratio has been in deficit for the past decade, so we might expect a positive medium-term outlook for the mineral.
Extra, Extra! Gold Analysis!
While BlackBull Markets does not offer the option to trade Palladium, we do offer a cache of other commodities, including the always popular gold. For this week’s technical analysis of gold, Anish Lal breaks down gold’s positive momentum on the hourly chart.
The last two weeks haven’t exactly been ideal for the major US indices. In times like these, perhaps it is good to remind ourselves how far the indices have come in the year to date. If anything, reminiscing about the indices extraordinary gains in 2021 should help us contextualise the minor misfortune befalling stocks and indices in September.
Devising a strategy for trading the GBPUSD requires an intimate knowledge of the technical and fundamental variables that affect this fan favourite pair. A perfect strategy is elusive GBPUSD, but a good or great strategy is within reach. Let’s look at the technical and fundamental variables that will push and pull the GBPUSD this week and see what information we can fold into our decision making.
The Australian Dollar (AUD) is commonly referred to as a commodity currency. As in, the relative strength of the currency is correlated with the price of certain commodities. For the AUD, Iron Ore and precious metals are the commodities that significantly impact its value.
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