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The palladium price rally

18 December 2023

The palladium price surged last week due to a convergence of positive factors. On Wednesday the Fed acknowledged the peak in US inflation during its press conference, leading to a more dovish outlook for interest rates and a weaker US dollar, supporting commodity prices. The palladium price had fallen over 45% this year and the recovery above $1,000/oz may have triggered some short covering.


Christmas comes early for palladium longs

Source: SFA (Oxford), Bloomberg

Source: SFA (Oxford), Bloomberg


Palladium outperformed after dovish Fed meeting

  • A more dovish outlook from the US Federal Reserve may have set the stage for
    palladium’s rally. Palladium had been oversold but it rallied above $1,000/oz
    following the Fed news.

  • Many metals’ prices were near recent price lows and in palladium’s case not far
    from the lows for the year. The Fed’s announcement triggered a decline in the
    dollar and rallies in base metals as well as precious metals. Palladium had been
    the worst performing precious metal this year but was the outperformer last week.

  • With the price continuing to rally on Thursday this may have been sufficient to
    cause some short covering. The most rapid part of the rally occurred after 9am
    New York time. This took the palladium price up more than 15% while other metals
    had much more modest gains. The price has now climbed over 20%.

  • The UK government announced additional sanctions on Russian metals on
    Thursday, although this notably didn’t mention palladium.

  • Speculative futures positions on NYMEX were net short equivalent to more than
    1 moz of palladium, close to a record.

Dr Ralph Grimble

Operations Director

Source: SFA (Oxford), Bloomberg

Source: SFA (Oxford), Bloomberg


Is the rally sustainable?

  • That depends on whether OEMs have run down the excess palladium inventory
    and come back to market in the New Year.

  • Stocks had been built up above normal levels owing to supply concerns following
    Russia’s invasion of Ukraine and South Africa’s faltering power system.

  • Typically, the first quarter sees positive returns for palladium (16 out of the last 20
    years). From a technical point of view there is resistance at $1,200/oz which will
    need to be overcome before the price can target the next resistance level around

  • Beyond Q1’24, the economy will need to have the soft landing that economic
    forecasts currently predict, to keep the palladium price supported well above
    $1,000/oz. SFA believes that there is still a significant risk of a hard(er) landing,
    which would cut demand and put a sustained price recovery at risk.

  • This latter scenario is analysed in SFA’s Q4’23 PGM Quarterly report which was
    published last week.

Source: SFA (Oxford), Bloomberg

Source: SFA (Oxford), Bloomberg

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