Palladium to end the year stronger at $3000, platinum to suffer a fall to $900 – CE

FXStreet Insights Team FXStreet

The recent disruption to global auto production stemming from ongoing semiconductor microchip shortages poses a downside risk to Capital Economics’ price forecasts for platinum and palladium. The bank maps out the potential impact on demand for the metals from three different scenarios.

Palladium market to keep in a deficit, platinum market to see a much stronger revival in global supply

“Our central scenario assumes the chip shortage limits vehicle production to around 80% of Q4 2020 levels in Q2 before easing, with the shortage fully relieved by mid-2022. In our upside scenario, vehicle production remains close to current levels this quarter, and the shortage is alleviated by end-2021. In our downside scenario, the shortage worsens, only improves from Q4, and is not fully resolved until end-2022.”

“The key takeaway is that under all of the scenarios, the shortage isn’t a reason to change our view that the palladium market will remain in a sizeable deficit for the next couple of years, but it increases the size of the surplus we are expecting in the platinum market this year.”

“The scale of the surplus we think is possible in the platinum market this year supports our forecast for the price to fall to $900 per ounce by end-2021, from about $1,200 now.”

“While the range of outcomes in the palladium market is much larger (owing to the larger share of demand derived from the auto industry), the fact that we think that the market deficit will remain close to its current level underpins our forecast for the palladium price to end this year at $3,000 per ounce, up slightly from ~$2,800 now.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

Gold clings to modest intraday gains through the first half of the European session, albeit it lacks follow-through buying and remains below $4,350. The US Dollar eases from a two-week high amid some profit-taking, offering support to the commodity. Traders, however, seem hesitant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk.

Cardano's bearish breakout warns of a 15% downside risk

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.