Palladium and platinum prices forecast: Will this recovery last?

Palladium and platinum prices have bounced back in the past few days even as concerns about demand continued. Platinum has jumped from the year-to-date low of $880 to the current $960. Similarly, palladium has risen from $1,198 to $1,300. The two metals are about 15% and 22% below their highest levels this year.

Demand concerns remain

Palladium and platinum are popular precious and industrial metals. As industrial metals, the two Platinum Group Metals (PGM) are used as catalytic converters, mostly in the automobile industry.

The two metals do well when there is elevated automobile demand and when interest rates are falling. Recent economic numbers are sending mixed signals about these metals. For example, data published on Thursday showed that Europe’s industrial production dropped by 2.2% in May this year. This is important since Europe is one of the biggest players in the auto industry.

Industrial and manufacturing production dropped in the UK, as I wrote here. Manufacturing production fell by 0.2% while industrial production retreated by 0.6%. 

Additional data showed that China’s exports and imports crashed again in June. This is important since China is one of the biggest buyers of platinum and palladium globally. The same trend is happening in the US. Therefore, using these leading indicators, we can assume that demand for the two metals will be a bit weak.

Another reason to be wary about demand is the growth of electric vehicles. Unlike internal combustion engines (ICE), EVs don’t need catalytic converters. Therefore, demand could be a bit mild this year.

On a positive side, there are signs that the Federal Reserve will end its hiking phase soon, which explains why the US dollar index (DXY) has tumbled lately. Consumer inflation dropped to 3.0% in June while core inflation slipped to 4.8%. In most periods, there is an inverse relationship between the US dollar and key metals like platinum and palladium.

Platinum price forecast

Turning to the 4H chart, we see that the platinum price dropped to a low of $884 this month. Since then, it has staged a strong comeback and moved above the important 25-period and 50-period moving averages. The two averages have made a bullish crossover pattern, which is a bullish sign.

Further, platinum has also risen above the key resistance at $901.90, the lowest point in February. Most importantly, the chart has formed an inverted cup and handle pattern, which is a bearish sign. Therefore, there is a likelihood that platinum prices will resume the bearish trend, with the initial support being at $900.

Palladium price prediction

The 4H chart shows that palladium price formed a strong support level at $1,206. It formed a double-bottom pattern, which is usually a bullish sign. The metal has now moved above the upper side of the descending channel. It has also jumped above the 25-day and 50-day moving averages. The Relative Strength Index (RSI) has moved close to the overbought level.

Therefore, there is a likelihood that palladium prices will continue rising as buyers target the important resistance point at $1,427, which is about 10% above the current level.