Palladium price prediction: here’s what to expect in the new year
- Palladium has been one of the worst-performing commodities in 2021.
- Chip shortage and platinum substitution have been the key bearish factors.
- Both the fundamentals and technicals paint a bullish outlook for palladium price.
Palladium price has recorded one of the highest declines among commodities in 2021. The coming year appears positive for the precious metal.
At the beginning of May, palladium price surged to its all-time high at $3,021.69. However, it has since dropped by about 34.33%. During that timeframe, other precious metals like silver and palladium have dropped by 14.58% and 22.96% respectively. Indeed, it has been one of the worst-performing commodities in 2021. However, based on both the fundamentals and technicals, it is due for a rebound in the coming year.
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In the current year, palladium price has been under pressure following the global chip shortage and the increased use of the cheaper platinum in catalytic converters. According to Metals Focus’ managing director, Nikos Kavalis, the easing of supply chain challenges and heightened purchases by China are expected to boost the precious metal in the new year.
The analyst has stated, “We expect a big rebound in demand, which should also be augmented by stock replenishment in China…The market will move back into deficit in the second half of next year, driving prices up.” Notably, Morgan Stanley expects palladium price to average at $2,100 per ounce in 2022.
Even with these bullish expectations, data from the Commodity Futures Trading Commission shows that net-short positions by various hedge funds are the most bearish since 2009. Automobile electrification and platinum substitution will be the key headwinds in the coming months.
Palladium price prediction
Palladium price has pulled back after rallying past a crucial level in the previous session. On Tuesday, the precious metal broke the resistance level at 2,000 for the first time in over a month to trade at an intraday high of 2,015.92.
At the time of writing, palladium price was down by 0.74% at 1,973.33. After hitting a 21-month low of 1,529.62 in mid-December, it has since surged by about 29.01%.
On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages. Besides, the formation of the bullish inverted head-and-shoulder pattern further signals additional gains in the ensuing sessions.
In the immediate term, I expect palladium price to find resistance along the week’s high at 2,015.92. As such, it will likely trade within a rather tight range with the 25-day EMA at 1,920.68 as the support level.
Additional bullish momentum will likely give the bulls an opportunity to break the aforementioned resistance and push the price higher to the next target at 2,101.02. On the flip side, a pullback past the indicated support level will likely have the metal decline to the 50-day EMA at 1,865.98.