Has Palladium Hit Rock Bottom?
BlackBull Markets | Sep 14, 2021 05:00PM ET
Palladium is currently trading at $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 $3,000/t.oz.
The metal’s current price is sitting snuggly between two weak touchstone levels. Over the coming trading week, we could see Palladium claw itself back up to $2,200/t.oz, rejecting prices as low as $2,000/t.oz but remain suppressed from current levels or break lower into a pocket between $2,000/t.oz and $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.
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.
h5 How long will the bottleneck in auto manufacturers’ supply chain last?/h5The 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 (OTC:BMWYY) 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.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.