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Technical analysis on palladium columns

By Markus Blaschzok for GoldSilberShop.de

Palladium technical analysis: lockdown and recession weigh on palladium price

Derivatives market: weakness in the last two trading weeks

There is now a slight relative weakness compared to the previous week and the week before last. The physical market still appears to be balanced. Over the course of a month, supply and demand on the physical palladium market were apparently relatively balanced, as the current CoT report shows. Platinum had outperformed palladium in the last few weeks, which could be an indication of an incipient substitution in the industry. We have been seeing a relatively neutral trend in palladium for a few weeks now – supply and demand appear to be relatively balanced. There is still no setup for a meaningful trade. Countercyclically, a buy would be interesting at $ 1,900. Should there be a second deflation phase in the context of a bankruptcy wave, then the palladium price should suffer and smear again properly. The recent partial shutdowns could force this scenario. In the short term, we would rather expect a further price correction, even if the CRV is not good for it.

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The futures market data for palladium are still in the buy range, but an oversupply is slowly building up

The recent lockdowns in the western world, which unnecessarily exacerbate the recession, are reducing new vehicle sales. While the initial lockdown was perceived as a short-term exogenous phenomenon, the population is slowly realizing that the recession is deeper and will last longer, reducing consumption and postponing new investment into the future.

The credit contraction is only slowly gaining momentum and the central banks will counter this by printing money. While new car sales picked up again in the summer, they could now suffer a new dent in the western world, causing demand for palladium for use in gasoline catalysts to decline. In this case, there could be an oversupply on the physical market for months, which could cause the palladium price to drop significantly again.

Due to these constant and strong political influences on the economy, it has become very difficult to forecast price developments in the short to medium term. Only the long-term price development over the next few years can be determined with a high degree of probability due to inflation and you can still act in short-term trading, but predictions for weeks and months are currently very difficult on the palladium market.

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Usually, the price of palladium falls significantly during prolonged recessions

The daily chart shows the recovery of the palladium price after the crash in March, as the shutdown of the mines tightened supply and demand recovered at the same time. However, the South African mines are producing again. While the index for the extraction of platinum group metals fell to 28.4 in April, it is currently back at 107.4%, which shows how quickly the supply has recovered. If the demand now falls significantly again, this calls into question the previous increase.

The uptrend has already been broken and the CoT data has shown relative weakness over the past six weeks of trading, which is a clear warning sign. If the political madness does not end and the recession in the western world deepens, prices are likely to fall due to falling demand from industry. The break in the uptrend generated half a sell-signal, which would be confirmed when it fell below the $ 2,200 mark. Below that, there is a risk of the price dropping to $ 1,900.

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The rise in prices is clearly losing momentum – there are signs of a trend reversal

The six-month chart shows consolidation at a high level. If the price falls below the support at US $ 2,200, a trap door opens and a sell-off to US $ 1,900 threatens, where speculators are once again brave to reach into the falling knife. A possible break-in should come to a standstill there. Depending on how political interventions in the economy will develop by then, we will then have to reassess the situation. In the short term, I am skeptical and another setback is conceivable. There is currently no good risk / reward ratio for a trade in the medium term. We stay apart for a short time.

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The downward trend has already been abandoned. A short-term sell-signal is confirmed below $ 2,200.

The euro-based palladium chart shows that the bearish wedge has already fallen. A decline to 1,650 euros could follow in the coming weeks. Only above 2,100 euros per troy ounce would the chart image currently brighten. Countercyclical purchases from the perspective of short-term trading become interesting at 1,650 euros.

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There was already a short-term sell signal on a euro basis

The ratio of platinum to palladium shows that palladium is currently very expensive compared to palladium. For physical investors who want to invest for a decade or more, it is therefore advisable to invest in the historically cheap platinum, as the risk-reward ratio is much better here.

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In the long term, palladium is historically extremely expensive

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