Palladium: When Markets Disagree With 'Fundamentals'
Tommy Humphreys | Jan 20, 2015 11:23AM ET
There is an interesting piece on palladium on Bloomberg entitled, “Palladium is a Metal Rarer Than Gold. Now It’s Even More Rare, Thanks to Cheap Oil ”. The article makes some logical points regarding global auto demand and the global palladium supply/demand dynamic. The article even includes quotes such as the following:
“U.S. auto demand is incredibly strong and might even surpass previous peaks that we saw before the financial crisis.” ~ Scott Winship, Fund Manager at Investec Asset Managements
“There’s a very bullish story there that’s going to play out in the long term…..There is a good argument that palladium should outperform other precious metals.” ~ Jeremy Baker, Senior Commodity Strategist at Harcourt Investment Consulting AG
All of this sounds very exciting and makes it appear to be a no brainer that palladium must be a great investment. However, there is a big problem when we pull up the weekly chart of palladium:
After a multi-year rally which saw palladium prices reach nearly $1,000/oz the market has corrected in recent months and price is once again breaking lower from a bearish flag pattern. The downside price target from this pattern is $685/oz which happens to coincide with previous support from 2013 (look to the left in the chart…).
The fact that sell-side analysts from Deutsche Bank (NYSE:DB) and Morgan Stanley (NYSE:MS) are so bullish on the white metal (Morgan Stanley forecasts over $1,000/oz for palladium in 2016) should only add further caution to investors’ view of palladium.
Who will be right? The “fundamental” analysts or the technicals. Of course both could be right on different time frames, however, in the near term it looks like palladium is heading below $700/oz before it will find sufficient support.
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.