During April, palladium quotes were actively attempting to grow. On a wave of rebound from three-year lows prices reached 1600 dollars per ounce, but by the end of the month buyer activity began to decline. As a result by the current moment quotes fell to March levels. If palladium fails to stay above 1,400, there is a good chance for making new spring lows.
Palladium prices show almost no reaction to the significant increase in prices for other precious metals. Over the last 12 months, palladium has lost more than 36% in price, while gold, silver and platinum recorded an increase by almost 10%. From historical highs above 3,400 last year, palladium prices have fallen almost 60%.
The main reason for the fall in palladium prices is the weakened demand for this metal. Companies making catalytic converters for automobiles have replaced excessively expensive palladium with cheaper platinum. Last year, similar changes in the technological process became especially relevant as palladium prices exceeded $3,000 per ounce, while platinum was trading below $900.
A significant shift from platinum to palladium in the automobile industry is needed to change the situation radically. However, there are no signs of that yet: even taking into account the steady growth of platinum prices in recent months, it is still cheaper than palladium by more than 30%.
The global market of palladium has been in a surplus position for the last 3 years. However, due to the fall in demand, even a potentially lower supply of the metal from Russia and South Africa is unlikely to cause a price increase similar to previous years.
The next support for palladium could be the level of 1400. If the price drops even lower, a further move to 1380 and 1340 should be expected.
The following trading strategy option can be suggested:
Sell palladium on a break-down of the 1400 level. Take profit 1 – 1380. Take profit 2 – 1340. Stop loss – 1460.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
