Palladium sky rocketed at $2,700

Palladium is back in the spotlight as the key Resistance at $2,500 failed to proven itself as the substantial 7-month barrier for palladium prices, but instead the asset continued to attracts more buyers above the $2,500. In the meantime, today we have also the breakout northwards of the 15-month trangle seen on the plummet of the price from $2,879 amid global lockdown.

Along with the majority of precious and industrial metals, palladium also found support on surging Treasury yields as markets are losing trust and confidence in the Federal Reserve being able and willing to fight inflation. The US Federal Reserve on Wednesday said the US economy was on track for its fastest expansion in nearly 40 years, but the central bank pledged to keep its ultra-easy monetary policy stance despite expected inflationary pressure.

Hence similarly to gold, palladium found support as is seen as a hedge against inflation, but rising Treasury yields have challenged that status as they translate into a higher opportunity cost of holding bullion. However what’s the significant difference with gold is the physical demand of palladium as an industrial metals and as one of them as a component of electric and hybrid car engines. The rally seen this week is also due to some reports from the Russian mining giant and the world’s largest palladium producer Nornickel said that its nickel, copper, platinum, and palladium output could be 15-20% short of its original guidance.

As Eugen Weinberg, head of commodity research at Commerzbank, said: ” the price could make further gains in view of the tight physical supply situation. Indeed, the situation could soon tighten even further as sales of new cars are likely to be given a boost when the corona-related mobility restrictions are lifted in Europe, which is expected to happen soon,”

Palladium is currently outside Bollinger Bands pattern  at $2,740 area looking overbought in the near and medium term. However the weekly spike seen this week turns the so far neutral Palladium outlook into a positive one as it boosted positive momentum higher. The daily RSI entered into the overbought territory, while MACD lines have spiked higher. But  despite the near term spike of positive bias, none of these two indicators has reached a peak yet, suggesting that the odds of a potential retests of records highs at $2,879 (key psychological level at $2,900), are rising. In the meantime the weekly outlook is turning positive as well. Hence the weekly closing tomorrow could be key as it could triggered the attention to fresh record highs for palladium.

On the flipside, selling pressure could resume in the near term due to the already overbought condition of the asset, with support area at $2,480-2,520. Next immediate Supprt is at 20-DMA, i.e. $2,390. If sellers manage to take over palladium and drift the asset below the latter then we could see a resume of the 7-month ranging market within $2,120-$2,520 area.