Palladium price could crash to $797 if this happens - technical analysis

Palladium price continued its downward trend this week amid concerns about demand. An ounce of palladium is going for $1,480, the lowest it has been since August 2019. It has dropped by over 56% from the highest point on March 7, 2022. 

There are a number of reasons why palladium has crashed in the past few months. First, it has dropped because of the inverted yield curve, which has fallen to the lowest point in decades. The yield curve, which is calculated by subtracting longer and shorter government bond yields, is usually seen as a good indicator for a recession.

Palladium prices tend to underperform in periods of a recession because of its industrial uses. Just like platinum, which I wrote about here, palladium is used in the manufacture of catalytic converters. These converters are used in the vehicle manufacturing industry to reduce emissions.

With interest rates rising, analysts believe that vehicle sales could lag in the near term. In fact, most automakers, including Ford and General Motors, reported lower vehicle volumes for 2022. This trend could continue as new cars get unaffordable.

Palladium price is also falling as investors bet that the demand and supply imbalance will get close in 2023. Historically, palladium’s supply has always fallen short of demand. As companies boost their mining activity, we could see the gap narrow. 

Palladium price forecast

Palladium chart by TradingView

On the weekly chart, we see that palladium formed what looks like a triple-top pattern near the resistance point at $3,000. In price action analysis, this pattern tends to be a signal that a financial asset will continue falling. Palladium has even moved below the neckline of this pattern at $1,550. This is a sign that bears are still in control. 

Meanwhile, the Relative Strength Index (RSI) has continued falling and is now nearing the oversold level. The price is also below the 50-day and 100-day moving averages. Therefore, the outlook of palladium is bearish, with the next key target being at the psychological level at $1,000. 

By measuring the distance between the neckline and the triple-top, we can assume that the price will drop to $797. This view will be confirmed if palladium moves below the support at $1,000.

However, a move above the key resistance level at $1,835 (June 2022 low) will signal that there are still more buyers in the market. If this happens, it could open the possibility of palladium rising to $2,000.