📈In spite of hawkish Fed, Palladium trades at 3-month highs
Palladium continues a strong upward move started in the middle of the previous week. Rally is continuing even in spite of the hawkish Fed that has boosted USD and pressured precious metals. Palladium gained yesterday even as gold and silver dropped significantly. What are the origins of the moves on the palladium market?
Interest in spot palladium has skyrocketed recently. Price of this precious metals gained almost 30% year-to-date with the majority of those gains being made over the past few sessions. Moves on the market are driven by concerns that as much as 40% of palladium mine supply may become unavailable. This is due to Russia being responsible for 40% of mine production. Risk of sanctions being imposed on Russia is real and they could be as far reaching as banning foreing companies from buying Russian commodity altogether. Palladium is primarily used in production of catalytic converters for combustion engines. It is expected that demand for palladium will increase this year as semiconductor shortages ease and car production will be able to rebound.
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Palladium is trading almost 30% year-to-date and approaches 4-month highs. However, price continues to trade 28-30% below all-time highs from May 2021. Nevertheless, it should be noted that the price broke above the 50% retracement of the recent downward move and above the 200-session moving average, which can be seen as a bullish signal. Source: xStaiton5
A significant increase of palladium spot price over futures price points to an increased interest in palladium for immediate delivery. Such a situation can be reasons with concerns over possibility of sanctions being imposed on Russian deliveries. Source: Bloomberg
Of course, it should be noted that in spite of the expected rebound of the automotive sector this year, Russia is also the second largest platinum producer in the world. Performance of platinum is often seen as a warning sign for palladium. However, outlook for platinum is brighter than for palladium as platinum is used in EV fuel cell production.
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