Unlike prices of other precious metals, the palladium price has had a weak performance over the recent time. The overall market optimism was enough only to cause the price to rebound by 7% from its year record low, which was set on December 23, but now it’s moving flat. There’s also a line of the midterm downward trend from the October maximum of 2356 coming from above, while another trend, an upward one, is attempting to form below. Where will the price come out from this triangle?
Most factors indicate that there will be a rise of palladium. The first major factor in favor of the metal is the economic reopening of China after lifting of COVID-related restrictions. Today’s release of December's data indicated more positive dynamics of the country’s economic development, despite a surge in COVID cases after the removal of quarantine measures.
Thus, the level of industrial production increased by 1.3%, which turned out to be higher than the forecasted level of 0.2%, the unemployment rate fell from 5.7% to 5.5%, while GDP showed a rise by 3% in 2022, which is lower than the government’s target of 5.5%, though higher than a 2.7% rise previously forecasted by economists.
This year, an acceleration in pace of GDP growth is expected in China. Economists forecast a 4.8% expansion of GDP, and almost all provinces of China set targets of economic growth of 5% and higher. This might cause an increase in demand for all commodities, including palladium.
Analysts at Goldman Sachs expect that China’s reopening will lead to a rise in prices of commodities, similar to the surge witnessed in 2007-2008. The bank had already predicted a multiyear super-cycle of commodities back in late 2020, because years of insufficient investing won’t allow supply to correspond with demand.
A rebound in the palladium prices from the minimum of December 23 was rather weak, as the prices didn’t even manage to consolidate above the Fibonacci correction level of 23.6% (at 1810). In case of a new growth wave, the range of 1800-1810 will be the first target of buyers.
The following trading strategy version may be offered:
Buy palladium within a range of 1740-1750. Take profit 1 – 1780. Take profit 2 – 1810. Stop loss – 1725.
Traders may also use Trailing stop instead of a fixed Stop loss at their convenience.