The palladium market has experienced a recent recovery, with prices rising by 8.7% over the week and reaching USD 1,034. This increase has been attributed to speculative impulses and technical signals.
Analysts from UBS caution that the long-term outlook for palladium is bleak due to structural changes in the automotive industry, particularly the shift towards electric vehicles. As the demand for palladium, primarily used in catalytic converters for combustion engines, decreases, the market is expected to face medium-term oversupply.
Despite the current price recovery, the palladium market has been under significant pressure throughout the year. Speculation regarding potential G7 sanctions on Russian palladium exports provided a temporary boost, but the anticipated sanctions did not materialize, and a strengthening US dollar limited further price increases. Russia continues to play a dominant role in the palladium market, yet the diversion of exports to eastern markets has mitigated immediate supply shortages in the West.
UBS analysts highlight that the combination of increased volatility and fragile demand complicates the prospects for a sustained recovery. The automotive industry's transformation is expected to have a profound impact on the future of palladium. As the industry increasingly shifts towards battery electric vehicles, the demand for palladium is expected to decline significantly. While the current slowdown in electrification and the rise of hybrid vehicles may provide some short-term support, UBS analysts foresee an oversupply in the medium term.
This anticipated oversupply is compounded by the palladium market's susceptibility to fluctuations, given its limited size and low trading volumes, which should prompt caution among investors.
Technical analysis of the palladium price reveals positive signals in the short term, with the price currently above the 10-day moving average, indicating bullish momentum. A critical resistance level is identified at USD 1,044; if surpassed, it could pave the way for further price increases. Conversely, a significant support level exists around USD 919, and a drop below this threshold could lead to a deterioration in market conditions.
The 200-day moving average remains on an upward trajectory, suggesting a stable sideways phase, while important medium-term marks are set at USD 832 for support and USD 1,247 for resistance.
The recent developments in the palladium market highlight the need for investors to reassess their positions. With the ongoing structural changes in the automotive sector and the potential for increased volatility, investors should stay informed about market trends and developments. The interplay between speculative trading and fundamental shifts in demand will be crucial as the palladium market faces challenges. The outlook for palladium remains uncertain, and stakeholders must remain vigilant in monitoring the factors that could influence future price movements.