PALL: Palladium Recovers, More Technical Upside Potential

seekingalpha04-03

Palladium futures reached a record high in March 2022 but have since experienced a significant decline.Russia's role as the leading palladium producer and the war in Ukraine has influenced the metal's...

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Notably, platinum (XPTUSD:CUR) and palladium (XPDUSD:CUR) are the only two platinum group metals that trade in futures markets, on the CME's NYMEX division, offering intriguing trading opportunities. On November 21, 2023, in a Seeking Alpha article about the collapse of palladium's premium over platinum, I wrote: In palladium, the bullish trend from 2008 through 2022 and the war in Ukraine led to the price spike that took the metal to an irrational price. Bearish trends tend to do the same on the downside, and prices below the $1,000 level in palladium could have created a significant bottom, creating a buying opportunity. Nearby NYMEX palladium futures were trading at $1,090.50 per ounce on November 21, 2023, with a low of just below the $1,000 level. Since then, nearby NYMEX palladium futures have made lower lows at $856 per ounce in February 2024. While picking highs or lows in any market is virtually impossible, palladium's decline from the 2022 high is far more than the current price level. The abrdn Physical Palladium Shares ETF (NYSEARCA:PALL) product tracks the price of the rare precious metal. The palladium bust followed the boom NYMEX palladium futures reached a record high in March 2022 when Russia invaded Ukraine. Long-Term NYMEX Palladium Futures Chart (Barchart) As the chart dating back to the 1970s shows, palladium futures spiked to a $3,380.50 high in March 2022. The bullish explosion ran out of upside steam at $3,380.50 per ounce, and palladium futures have made lower highs and lower lows since the March 2022 peak. Geopolitics caused the 2022 peak Russia is the world's leading palladium-producing country. Sanctions on Moscow and Russia's retaliation against \"unfriendly\" countries supporting Ukraine caused the supply fears that launched palladium futures to a record peak. In 2023, the total palladium production was 210 metric tons or just over 6.75 million ounces. Worldwide Palladium Production 2023 (Statista) As the chart highlights, Russia produced 92 tons, or just below three million ounces, of palladium in 2023, accounting for 43.8% of worldwide output. South Africa, the world's second-leading palladium producer, produced 71 metric tons. Together, Russia and South Africa were responsible for 77.6% of the global supplies. While the war in Ukraine continues in March 2024, the metal's price has declined to under one-third of the price at the 2022 high. Palladium futures reached a low in February 2024 Palladium futures reached the most recent low in February 2024. Ten-Year NYMEX Palladium Futures Chart (Barchart) The ten-year chart shows that palladium futures became a falling knife after the March 2022 spike high. The pattern of lower highs and lower lows led to the $856 per ounce low on the nearby NYMEX palladium futures contract in February, a 74.7% plunge from the record peak. The now active month June palladium futures contract fell to $862 per ounce on February 13. Short-Term Six Month NYMEX Palladium Futures Chart (Barchart) The chart shows the recent recovery that took palladium for June delivery to a $1,120 per ounce high on March 15. At just over the $1,000 level on April 2, time will tell if palladium's price can continue to recover. The case for a more significant recovery The following factors favor the odds of a substantial recovery in the palladium futures market:  Technically, a 50% retracement of the move from the March 2022 high to the February 2024 low would take palladium futures to the $2,118.25 per ounce level. Palladium remains a critical input in automobile catalytic converters that clean toxic emissions from the environment. Palladium is also required for jewelry, dentistry, watchmaking, blood sugar test strips, aircraft spark plugs, surgical instruments, and electric contact. Many professional transverse (concert or classical) flutes are made of palladium. The war in Ukraine continues, and relations between countries supporting Ukraine have caused ties with Moscow to deteriorate. As the world's leading palladium producer, Russia significantly influences the metal's price path. Russia's cash requirements to fund its war could have led to selling strategic palladium stockpiles, further pressing the metal's price over the past years. While Russian stockpiles are not public and a national security matter, the record high price in 2022 could have encouraged Russia to sell strategic palladium inventories. The green initiatives support increased demand for palladium.  The bottom line is palladium prices rose to an unsustainably high level in March 2022. Still, the decline may have taken the metal to an equally unsustainable level at under $900 per ounce in February 2024. PALL is the palladium ETF product The most direct route for a risk position in palladium is the physical market for bars and coins or the NYMEX futures market. The Aberdeen Physical Palladium ETF product is an alternative that tracks the palladium price. PALL's fund profile states: PALL ETF Fund Profile (Seeking Alpha) The most recent top holdings include: Top Holdings of the PALL ETF Product (Seeking Alpha) PALL holds 100% of its assets in physical palladium bullion. At $92.40 per share on April 2, PALL had $224 million in assets under management, PALL trades an average of 59,778 shares daily and charges a 0.60% management fee. The most recent recovery rally in June NYMEX palladium futures took the price 29.9% higher from $862 on February 13 to $1,120.00 per ounce on March 15. Short-Term Six Month Chart of the PALL ETF Product (Barchart) Over the same period, PALL rose 28.8% from $78.50 to $101.12 per share. Since palladium trades around the clock and PALL is only available during U.S. stock market hours, the ETF may miss highs or lows when the stock market is not operating.  Palladium is a rare strategic and precious metal. As the price consolidates around the $1,000 per ounce level, this could be the perfect time to consider adding palladium to portfolios. Palladium futures fell 38.3% in 2023, and another 7.91% in Q1 2024. If the price continues to consolidate around the $1,000 per ounce level, it could be building cause for a recovery rally over the coming months.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2424002101"}