Palladium Futures Plummet

March 27, 2019 - 6:12pm

 by Gary Wagner

For the first time since late August of 2018 palladium futures pricing has broken below its 50-day moving average. Palladium’s historical rise began on August 14th, 2018 after pricing bottomed to $815 per troy ounce. Within the next three months palladium pricing had breached $1,000 per ounce trading to a high of $1135 by October 23rd of last year.

Following that impressive rally palladium prices corrected slightly, on October 31st fell to $1054.30 before staging a recovery. The rally that followed this shallow correction took pricing from just over a thousand dollars to $1390 on January 17th. Once again on January 25th palladium would experience an extremely shallow price correction taking pricing to $1264 per ounce.

Yet again following a tepid price decrease palladium returned to an overwhelmingly bullish mode which would take pricing to $1550 per troy ounce, a new all-time historical high. From this new record high palladium yet again would experience a price retreat that was extremely shallow in nature, dropping only $90.00 to $1459, before one last rally would take prices to the all-time record high of $1579.90.

The following day on March 21st, palladium futures began what appeared on the surface to be yet another shallow correction and three days later traded back to $1500 per ounce.

However, there seems to be a fundamental shift in market sentiment regarding the use of palladium instead of platinum in catalytic converters for automobiles. The price differential between the two precious white metals were too great to ignore, and news began to surface about auto manufacturers switching back to platinum.

The net result was plummeting palladium prices which since yesterday are $105 lower, with futures currently fixed at $1410.40. On a technical basis it is traded to a critical level just above the .23% Fibonacci retracement. The data set used for this retracement begins at $815 and concludes at $1579. That makes the .23% retracement level so significant.

Although palladium has not broken below that price point, it has in fact traded below its 50-day moving average, at $1426 for the first time since this rally began.

Will History Repeat Itself?

This is not the first time we have seen palladium prices move up in a parabolic manner. In 1997 Palladium was trading just over $100 per ounce, and by January 2001 had reached an apex of $1000, a tenfold increase in pricing. However, this parabolic rally was followed by a parabolic decline. By March 2003 pricing fell dramatically reaching a low of $144 per troy ounce, the net result of the precipitous decent.

Historically speaking this most recent rally began in January 2016, with palladium trading at $457 per ounce. The result of a three-year dynamic rise. Is it possible that over the next few years history will repeat itself and we will see palladium prices begin to drop dramatically as they have before in January 2001?

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action

Friday morning, March 8th, we issued a trade alert to buy June 2019 gold (GC M19)

Maintain long June 2019 gold at $1305 

Maintain Stop at $1297.13 **

A hard break below the 50-day MA would trigger us taking the stop to the market.

Gold Market Forecast
For the last four consecutive weeks (including this week) gold has made both a higher high, and a higher low.
If this week closes higher this would be the fourth consecutive week of higher closes also. However, yesterday's  $8.00 decline, when added to today's $6.50 drop puts the rally in question. 
There was some technical chart damaged caused, but not major, which would occur if prices break below $1315-1316, the fifty day moving.
Sentiment Indicator:
Gold -> Neutral
Silver -> Neutral
S&P 500 -> Neutral
Bitcoin -> Bearish