Palladium price prediction as geopolitics triggers a shift in fortunes

Palladium price has been rallying for about two weeks now amid the ongoing geopolitical tensions in Eastern Europe.  

Geopolitics

Russia is the leading producer of palladium in the world; accounting for about 40% of the mined metal. As such, the ongoing tensions with Ukraine have traders concerns over the probable tightening of the metal’s supplies. The EU and US is considering sanctions on the country’s leading banks in the event of an invasion. Executing the sanctions may hinder the conversion of rubles to US dollars; an aspect that would impact palladium exports.

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According to US General Mark Milley, a Russian invasion in Ukraine would be “horrific”. During a news conference at the Pentagon, General Milley indicated that the Russian troops near Ukraine’s border is the hugest since the Cold War.

On the one hand, Russia has insisted that it does not plan to invade Ukraine. However, Ukraine has urged Russia to pull back its troops and engage in dialogue.

The recent rallying in Palladium price is a turn around of its fortunes in 2021 when chip shortage impacted car production and the subsequent demand for catalytic converters. Indeed, it was one of the worst performing commodities in 2021, having dropped by close to 50% from its all-time high of $3,022.76 in May.   

Palladium price technical outlook

Palladium appears set to record the third week of gains. Notably, the precious metal has been in the green for 10 consecutive sessions; rallying by close to 30% during that timeframe. It has been holding steady above the psychologically crucial level of $2,000, having dropped past that level about two months ago.

As at 10:25 a.m UTC, it was at 2,413.46. This is its highest level since September 2021.

A look at the daily chart shows that palladium price will likely record further gains in the ensuing sessions. It is trading above the 25 and 50-day exponential moving averages, which is a bullish sign.

I expect the commodity to remain on an uptrend despite a probable pullback. For as long as it continues to trade above 2,000, the bulls are still in full control.  

With an RSI of 81, it is in the overbought territory. As such, the market may record a corrective decline as investors enter into profit-taking mode. A move below its current support level of 2,355.25 may push it to 2,250 before reviving its upward momentum.

On the upside, Palladium price may hover around 2,400 in the immediate term as the bulls gather enough momentum to reach the next target at 2,500.