Palladium price forecast for the second half of 2020: Both the basics and technical determinants stand out

Palladium has been acting absolutely hectic until 2020, but on the other hand it was a large investment asset offering numerous opportunities. Palladium is another shiny metal that is considered a commodity, sometimes a risky asset, but also a safe haven. It is used in a wide range of products in the automotive and electronics industries and for jewelry, which means that both demand and price grow when the global economy is doing well. On the other hand, it is a rare commodity, 30 times rarer than gold, making it a safe haven in times of uncertainty, and indeed it has acted as such in more recent times. In fact, palladium rose sharply during the first two months of this year, as the coronavirus epidemic broke out in Wuhan, rising by nearly $ 1,000, surpassing the price of gold and approaching the $ 2,900 mark, by about 1. $ 900 at the end of 2019. So, in general, palladium has only increased in value – either at a time of economic prosperity or economic collapse – both as a commodity, where demand will continue to grow, and as a safe haven. Palladium was basically a big investment, when the customs tariff for the US and China started, it was a great investment last summer, before the big hit, and it was technically a good investment earlier this month, after the surge. But the amazing trading opportunities don’t seem to end with palladium, so we’ll be actively trading XPD / USD. when the tariff tariff for the US and China started, it was a great investment in the summer of last year, before the big hit, and it was technically a good investment earlier this month, after the surge from surges. But the amazing trading opportunities don’t seem to end with palladium, so we’ll be actively trading XPD / USD. when the tariff tariff for the US and China started, it was a great investment in the summer of last year, before the big hit, and it was technically a good investment earlier this month, after the surge from surges. But the amazing trading opportunities don’t seem to end with palladium, so we’ll be actively trading XPD / USD.

Palladium was traded around $ 200-300 until the late 1990s, when it made a strong bullish move, driven in part by its increased use in the computer dotcom industry, which rose sharply during the period. It then broke for the first time above a large round figure of $ 1,000, but returned to its normal range in the early 2000s. During the 2008 crisis, palladium did not rise sharply like gold and traded in a slow but steady growth trend until 2008, showing that it increased in value as a commodity in demand as the global economy repelled the 2008-09 economic crisis. But US-Chinese trade tariffs have increased growth since 2018, as it has become clear that a trade war is underway. Palladium began to act as a safe haven, turning into an exceptional bullish time during uncertain times. This proved particularly true when XPD / USD rose during January and February 2020, when a coronavirus pandemic hit China. It trembled during March and April, but continued its ascent in July, confirming its safe haven status. So when we trade palladium, we should first confirm whether it is acting as a commodity or as a safe haven – although this is a long-term change, so we don’t have to make quick decisions.

Predict the price of palladium for the next 5 years

As with most financial assets at the moment, there is a new environment for palladium trading, and in the short to medium term this will not change much. Assets like this are all affected by the coronavirus pandemic and daily news releases that are constantly messing with feelings in the financial markets. The USD has been in decline for some time, maintaining risky assets and safe havens, and palladium became bullish again in July. But the situation could change very quickly. During the lockdown, the U.S. economy shrank the most, but has been recovering nicely since May, despite problems and uncertainties. But if those flaws disappear, the USD is likely to turn bullish, which will be a negative factor for XPD / USD. The sense of risk is constantly reversing, while geopolitical and trade tensions are likely to keep safe havens like palladium on offer. Demand is also expected to rise, especially in the automotive industry, and weekly and monthly charts show more, so the long-term analysis of palladium seems positive.  

COVID-19 pandemic – a risky feeling 

The COVID-19 crisis had serious consequences for platinum group metals. Widespread blockades imposed to curb the spread of the virus have severely affected both supply and demand, and this has had a huge impact on the world economy. The rapid spread of COVID-19 in Europe, the US, the Middle East, China and the rest of Asia has caused palladium prices to fall by more than 10%. The blockades affected the global supply chain and the automotive sector around the world, ultimately affecting palladium prices. However, sentiment around palladium has been positive for most of the last decade, with prices rising sharply in 2019 and 2020, and by almost 80% in the last six months, to a record high of over US $ 2,800 per ounce. Since the beginning of the year, investors have turned to safe havens and that feeling has persisted for fear of a second wave of coronavirus. As a result, the global stock market often moves lower, while trading in safe havens, such as the U.S. dollar and palladium, still remains bullish.

As we all know, the long-awaited trade agreement between the US and China, signed earlier this year, has also boosted prices. Dealers expect the agreement to help ease pressure on global economic growth and slow the decline in Chinese car sales. But for now, the coronavirus pandemic is a big, bad wolf, so until it’s over, other issues won’t be as important – it will only affect the sense of risk if the coronavirus withdraws.   

Will the demand for palladium increase?

The use of palladium is intended to be intensified in vehicles with internal combustion engines, while car manufacturers are trying to meet stricter emission legislation in Europe and China, increasing palladium, platinum and rhodium by at least 30% for three-way catalytic converters in most major market vehicles. That would boost demand to more than 10 million ounces, despite a slowdown in global economic growth and falling car sales in key markets such as Europe, the U.S. and China. As a result, prices are likely to remain high as supply will fail to keep up with demand. In addition, a 14 percent increase in palladium use in vehicles with internal combustion engines boosted its demand to a record 9.7 million ounces last year.

On the supply side, primary reserves from mining production may fall slightly, as a result of rationalization in South African mines and the depletion of palladium-rich surface materials in Russia. However, high palladium prices will continue to encourage a secondary recovery from recycling, but this will not be enough to reduce the deficit in any significant way. A significant supply deficit is likely to support prices due to short- and medium-term market uncertainty, as a result of the rapid spread of COVID-19 from China to the US and the rest of the world. The short-term negative impact on car sales in 2020, due to the economic slowdown, could also affect palladium prices.

Geopolitical and trade tensions are likely to continue

The reason for the high degree of market uncertainty could also be attributed to prolonged geopolitical and trade tensions between the US and the rest of the global economies. These include the European Union (EU), the United Kingdom and China. Furthermore, any activity that intensifies the US-China fight is likely to boost palladium prices to record highs. China and the United States, meanwhile, have dropped fresh sanctions on each other in the ongoing conflict. Both countries expelled numerous diplomats from the opposing country, amid mutual accusations of espionage. China is also trying to take over Hong Kong, while the US has increased its military presence in the East China Sea, so the situation is not so calm, despite the fake smiles of photographers. This has caused the futures of palladium to climb to life heights, as safe havens provide refuge in times of uncertainty.

Falling stock market

the recent crash on the U.S. stock market in 2020 was not limited to the United States. Instead, it is a global stock market crash that began on February 20, 2020. On February 12, the Dow Jones, NASDAQ Composite and S&P P 500 industry averages ended at record highs (while the NASDAQ and S&P 500 reached the next record in February 19). From February 24 to 28, stock markets around the world reported their biggest one-week decline since the 2008 financial crisis. OPEC countries, led by Saudi Arabia. This informally became known as Black Monday. At the time, it was the worst stock decline since the Great Recession of 2008. The relationship between palladium and stock prices was reversed. Mostly palladium prices will fall when stock markets perform well and vice versa. Likewise, when the stock market crashes, the demand for palladium grows as more and more investors look for safer options. Although currently the USD is falling rapidly, which keeps the demand for both safe haven and risky assets, and palladium benefits from both.  

XPD / USD correlation

The correlation between the US dollar and palladium is not as strong as it is with gold or some other risky asset, but the correlation still exists because it is quoted in US dollars. Obviously, palladium has its own mind, moving from a safe haven to commodities, but it mostly benefits both, as the price has been rising since 2009. Although palladium has followed its path most of the time, in certain periods the USD is the driver of XPD / USD. From 2014 to 2016, the USD index grew, as shown in the DXY chart below.

XPD / USD first became bearish and then bullish

During the same period, the XPD / USD retreated lower, meaning that the rise in the USD negatively affected the price of palladium. From 2016 to 2018, DXY turned into a bearish decline, from 103 points to 88 points, and XPD / USD rose from 480 to $ 1,140. During the shock in the first half of March 2020, DXY jumped from 94 to 103 points, while palladium fell lower, only to make things change in the coming months. So when we trade palladium over the coming months / years, we have to keep an eye on DXY, especially during the U.S. election later this year.    

Technical Analysis – Will the rejection of 20 SMA last?

Palladium turned bearish, after pulling lower to 20 SMA on the monthly chart

In the 1990s, palladium traded in the range of $ 200 to $ 400, but rose above $ 1,000 in the late ’90s. Eventually, the price dropped again in the early 2000s, but that shift above the $ 1,000 level was a psychological breaking point, and sentiment eventually turned into a bull for palladium. The trend for palladium was bullish and stable, from 2006 to September 2018, when XPD / USD rose sharply as palladium traders realized that trade tariffs between the US and China would be more than mere skirmishes, and the global economy was going continue to suffer the consequences. XPD / USD rose from 900 to more than $ 1,620 by March 2019, but the biggest rise only followed, starting in September 2019, when palladium, which traded at $ 1,500, jumped to $ 2,880, with the highest growth come in January and February 2020. Finally, during March we saw the reverse, as was the case for most of the property, and this also continued in April. 20 SMA (gray) broke on the monthly XPD / USD chart, but the price returned above that level in the same month, so it was not counted as a break. This moving average held up well during May and June, confirming itself as an indicator of support in this time frame. By the way, the candlesticks from the previous two months have closed like doji, which is a bull signal for a turnaround, and the bull turnaround is already underway, now in July. The price has climbed from $ 1,880 to $ 2,208 by this month, a 15% increase in value. According to this monthly chart, palladium should continue its bullish momentum, now that the bottom order has been completed and 20 SMA holds as support. and this also continued in April. 20 SMA (gray) broke on the monthly XPD / USD chart, but the price returned above that level in the same month, so it was not counted as a break. This moving average held up well during May and June, confirming itself as an indicator of support in this time frame. By the way, the candlesticks from the previous two months have closed like doji, which is a bull signal for a turnaround, and the bull turnaround is already underway, now in July. The price has climbed from $ 1,880 to $ 2,208 by this month, a 15% increase in value. According to this monthly chart, palladium should continue its bullish momentum, now that the bottom order is complete and 20 SMA holds as support. and this also continued in April. 20 SMA (gray) broke on the monthly XPD / USD chart, but the price returned above that level in the same month, so it was not counted as a break. This moving average held up well during May and June, confirming itself as an indicator of support in this time frame. By the way, the candlesticks from the previous two months have closed like doji, which is a bull signal for a turnaround, and the bull turnaround is already underway, now in July. The price has climbed from $ 1,880 to $ 2,208 by this month, a 15% increase in value. According to this monthly chart, palladium should continue its bullish momentum, now that the bottom order has been completed and 20 SMA holds as support. so it did not count as an interruption. This moving average held up well during May and June, confirming itself as an indicator of support in this time frame. By the way, the candlesticks from the previous two months have closed like doji, which is a bull signal for a turnaround, and the bull turnaround is already underway, now in July. The price has climbed from $ 1,880 to $ 2,208 by this month, a 15% increase in value. According to this monthly chart, palladium should continue its bullish momentum, now that the bottom order has been completed and 20 SMA holds as support. so it did not count as an interruption. This moving average held up well during May and June, confirming itself as an indicator of support in this time frame. By the way, the candlesticks from the previous two months have closed like doji, which is a bull signal for a turnaround, and the bull turnaround is already underway, now in July. The price has climbed from $ 1,880 to $ 2,208 by this month, a 15% increase in value. According to this monthly chart, palladium should continue its bullish momentum, now that the bottom order has been completed and 20 SMA holds as support. The price has climbed from $ 1,880 to $ 2,208 by this month, a 15% increase in value. According to this monthly chart, palladium should continue its bullish momentum, now that the bottom order has been completed and 20 SMA holds as support. The price has climbed from $ 1,880 to $ 2,208 by this month, a 15% increase in value. According to this monthly chart, palladium should continue its bullish momentum, now that the bottom order has been completed and 20 SMA holds as support.

 150 SMA turned from resistance to support for XPD / USD

In addition to the monthly chart pointing up, the weekly chart also points to palladium. The price rose above all moving averages in this time frame, and the 150 SMA turned into support right after it broke. All the last three candlesticks relied on this moving average as support. The previous two weeks the candlesticks closed like a doji, which in this case is a bearish signal for a reversal after the climb, but 150 SMA was held in support, and this week the price went up again, forming a rather bullish candlestick. Thus, the technical analysis on the time frame charts also indicates the basics which are also mostly bulls for palladium, making it a good investment to buy.