Palladium has faced significant challenges in 2024, with UBS analysts labeling it as the worst-performing precious metal of the year. The metal's price has been volatile, reflecting market instability and changing demand dynamics.
After reaching a low of USD 830.75 in August, palladium experienced a brief rally, but then dropped again to around USD 925. As of November 22, 2024, palladium was trading at USD 1,010.00, highlighting the ongoing instability in its market.
The recent fluctuations in palladium's price can be attributed to various factors, including the re-election of Donald Trump and its impact on commodities markets. The strength of the US dollar also affects palladium, with a rising dollar putting downward pressure on the metal. The USD 1,000 mark and the 200-day moving average at around USD 990 are seen as important thresholds for traders, indicating the metal's volatility over the past 200 trading days.
Weak demand prospects have contributed to palladium's poor performance, according to UBS. Speculation about potential G7 sanctions on Russian palladium exports briefly increased prices, but without concrete sanctions and with a stronger US dollar, prices fell below USD 1,000 again. Russia, as a major producer of palladium, plays a crucial role in the market. While an export ban could lead to supply shortages in Western markets, the diversion of Russian palladium to Eastern markets could mitigate the impact of any restrictions.
In the short term, there are some factors supporting palladium, such as the ongoing demand for hybrid vehicles that use the metal in their autocatalysts. However, UBS maintains a neutral 12-month outlook for palladium, warning that low trading volumes and the limited size of the market make trading in this metal particularly risky. The analysts believe that while there may be temporary support, the long-term outlook for palladium is challenging.
Looking ahead, UBS predicts a decline in palladium demand as the automotive industry shifts towards battery-powered electric vehicles. This transition is expected to reduce the need for palladium-based autocatalysts, potentially leading to an oversupply in the future. UBS remains optimistic about other precious metals but sees palladium's future as less favorable, with long-term risks outweighing short-term gains.
The volatility in palladium's market reflects broader trends in precious metals, where investor sentiment can change rapidly in response to geopolitical events and economic indicators. The interplay between supply, demand, and external market forces will be crucial in determining the trajectory of palladium in the coming months and years.
In summary, palladium's recent performance highlights the complexities and uncertainties of the commodities market. With UBS warning of long-term risks and the potential for continued volatility, investors are advised to approach palladium with caution and closely monitor market developments and shifts in demand dynamics. The future of palladium remains uncertain, making it a focal point for traders and investors.