Palladium price forecast: on the cusp of a major breakout

Palladium price is bouncing back as investors anticipate higher demand for the metal. The bullish trend is also mostly because of the overall trend among precious metals like silver and gold. It is trading at $2,168, which is about 17% above the lowest level in September this year.

Global economic rebound

Palladium is a precious metal belonging in the platinum group metal (PGM) group. The metal is mostly mined in countries like Russia, South Africa, Zimbabwe, and Canada. It is mostly bought by companies in the UK, US, and China.

Palladium is mostly used in the manufacture of catalytic converters, which is an important component of vehicles. Its role became more important after the Volkswagen emission cheating scandal.

In its aftermath, more companies tightened their emissions standards, which led to more demand of palladium. Indeed, it was after this scandal that the palladium price became more expensive than gold.

Read more: how to invest in Palladium

The palladium price has had a relatively difficult few months. Indeed, before October, the price was down in the previous five consecutive months.

This drop was mostly because of the performance of the automobile market. This year, many automakers like Toyota, Volkswagen, General Motors, and Ford have all slashed their production targets. Indeed, the automobile industry is expected to cost these automakers more than $210 billion because of the chip shortage. This is according to a research by AlixPartners.

Still, the palladium and platinum prices have several catalysts going forward. First, the metal is expected to remain in a supply deficit for several more years. Second, palladium price will likely rise as the chip shortage eases in the coming year.

Finally, economic data is supportive of more demand. For example, this week data showed that the US retail sales did well in October. Additional data showed that inflation is rising in the US and other key countries like Canada and the UK.

Palladium price prediction

The daily chart shows that the palladium price found a strong support at $1,850 a few weeks ago. Since then, it has rallied by about 18%. The current price is at an important resistance level since it struggled moving above it in October. It has also formed what seems like a small cup and handle pattern. In price action analysis, a cup and handle pattern is usually a bullish sign.

Therefore, there is a likelihood that the palladium price will have a bullish breakout in the coming days as bulls target the key resistance at $2,500, which is about 15% above the current level.