Palladium: A White -- Not Yellow -- Metal Play
Matthew Bradbard | Jul 08, 2013 12:26PM ET
Palladium prices surged today trading higher by 2.67% as of this post. Thousands of mine workers at Anglo American Platinum Ltd., the world’s largest producer of the metals are on strike. The workers went on strike at two mines in South Africa having refused to go underground. South Africa accounts for 73% of the global platinum and approximately 36% of the world’s palladium. Union and labor disputes have been ongoing for the last year and until new agreements can be established this could be extremely bullish. These events have already been factored into the price so we will need further unrest and/or disputes to see additional upside.
Bullish Catalyst
To date, unrest and labor disputes have served as a bullish catalyst lifting other metals in the complex. All metals appear to be set for a rebound as this rising tide should lift all boats. This in combination with a technical correction and short covering bounce should get metals shining once again. If investors need additional rationale bargain hunting and safe-haven demand has caused this beaten down sector to attract buyers.
Now for the trade
Since putting in a bottom on 6/27 at $629.40, futures have appreciated 10.5% lifting above the 38.2% Fibonacci level and a trade above its 20-day MA (red line) for the first time since 6/13. I feel there is gas in the tank and anticipate a 61.8% retracement, lifting September futures back above $725 or an additional 4.3%. Because palladium is not as followed as some of the other majors, I deem it necessary to mention the contract size: at 100 ounces, every $1 move is a gain/loss of $100 per contract.
As long as futures stay above the horizontal red line in the chart above ($655/660), I remain friendly. Most of the open interest in September call options comes in above $700/ounce with the most open interest at $750...maybe someone knows more than me, which would not be hard on this metal as I spend most of my time in this complex in gold or silver.
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.