Palladium Price Forecast: This Sell-Off Has More Room to Run

Summary:
• Palladium price pulled back sharply as concerns about a global recession rose. Its price retreated to a low of $2,025. What next?

Palladium price pulled back sharply as concerns about a global recession rose. Its price retreated to a low of $2,025, which was significantly lower than this month’s high of $2,295. This price is about 42% below its year-to-date high. Similarly, platinum price has crashed in the past seven days straight and is about 25% below its highest point this year.

Recession concerns

Palladium is an important asset that is both a precious metal and an industrial one. As a precious metal, its price tends to track that of gold and silver which are affected by policies of the Federal Reserve. On the other hand, as an industrial metal, it usually reacts to macro events. 

Palladium price has been in a strong downward trend in the past few days as investors react to the recent actions by the Fed. Minutes published last week revealed that the committee was still hopeful about interest rates even as inflation starts cooling. As a result, the US dollar and the VIX index have soared while commodity prices have pulled back.

Palladium and platinum prices also declined because of the rising signs that the economy is heading towards a major recession. China’s central bank decided to slash interest rates for the second time this month in a bid to stabilize the economy. The rate cut happened a week after the bank decided to cut two important rates.

China is an important market for palladium. Many wealthy people in the country often buy palladium jewelry while the fast-growing auto industry buys a lot of it. Palladium is mostly used as a catalytic converter. The sector has started struggling as inflation bites. For example, Ford confirmed that it will lay off 3,000 salaried jobs.

Palladium price prediction

The four-hour chart shows that the palladium price has been in a strong bearish trend in the past few days. In this period, it dropped from a high of $2,296 to a low of $1,970. It has managed to move below the 25-day and 50-day moving averages while the Stochastic Oscillator moved slightly above the oversold level.

Therefore, palladium and platinum prices will likely continue falling in the near term. If this happens, palladium will likely retest the important support at $1,900. A move above the resistance at $2,100 will invalidate the bearish view.