A strong rebound can be spotted on palladium and platinum markets. Let us remind that a recent sell-off on those markets, especially the palladium market, was a result of numerous carmakers halting production. A point to note is that halts are not result of a weak demand but rather shortages on the semiconductor market. Having said that, one may expect demand for palladium to quickly pick up once those supply issues are resolved. Outlook for platinum may be even better than for palladium as platinum is used in production of fuel cells for electric vehicles and is also set to benefit more from jewellery demand recovery.
Nornickel, the largest palladium producer in the world, says that this year deficit on the market will reach 200-300 thousand ounces, down from previously expected deficit of 400-500 thousand ounces. Forecast for the next year was boosted from 700 thousand deficit to 300 thousand deficit.
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Open account Try demo Download mobile app Download mobile appNew projects in Russia and South Africa are expected to become operational in 2024, what may push some precious metals markets out of a deficit. Moreover, an increase in energy prices around the world may lead to production halts and mines as palladium production is an energy-intensive process.
Investment demand is a key
Palladium and silver are the only precious metals that saw their ETF holdings increase year-to-date. On the other hand, ETFs were selling out palladium holdings in the recent quarter. Nevertheless, the amount of palladium held by ETFs (in absolute terms) compared to holdings of other precious metals is low and amounts to less than $1 billion. Net speculative positioning (green line) sits at the lowest level in history, creating a chance for the price recovery. Source: Bloomberg
Palladium broke above the 23.6% retracement and above the $2,200 per ounce. Nevertheless, upward move was halted in the area marked with local lows from September 2020 - January 2021 period. The upper limit of the market geometry and a potential resistance can be found in the $2,300 area. Source: xStation5
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