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A Palladium Price Forecast for 2019

After our gold forecast and silver forecast which were both mildly to wildly bullish we are on record with a palladium price forecast 2019. The long term palladium (PALLADIUM) price chart as well as palladium fundamentals suggest a bullish palladium price forecast for 2019, here is why.

[Ed. note: This palladium price forecast 2019 article was originally published on October 23d, last year. Readers can verify this by checking the dates on the charts. Throughout 2019 we will continuously update this palladium price forecast, every 4 to 8 weeks. The new updates will appear at the bottom. This way our followers can track how this market evolves, and how performant our initial palladium price forecast has been. With every major update in 2019 we will also update the publish date. Last update of this palladium price forecast: April 14th, 2019.]

We will revise the state of the physical palladium market, the palladium to gold ratio, the palladium weekly and monthly charts, before concluding a palladium price forecast for 2019.

Palladium price forecast 2019: physical industrial shortage

Demand for physical palladium is one of the important factors to consider especially because there is a global supply deficit since 2012. As per Maxwell Gold in this palladium market update deficits are expected to persist for the foreseeable future, but mining supply for 2018 is expected to be flat as a decrease in South Africa and Russia may be offset by a gain in output from Canada according to Metals Focus data.

The most important consumer of physical palladium is the car industry. Palladium is used in catalytic convertors that convert the harmful gases in car exhaust into less toxic substances.

According to R. Michael Jones, chief executive officer of Platinum Group Metals, “car demand is solid across the world, and trends are toward big SUVs in the U.S. and small gasoline engines in Asia. All of these are growing palladium demand.”

Specialty chemicals company Johnson Matthey calculated that physical demand for palladium exceeded supply in recent years:

  • Demand exceeded supply in 2016 by 89,000.
  • Demand exceeded supply in 2017 by 801,000 ounces.
  • For 2018 the forecast to have another shortfall of 239,000 ounces.

The first chart visualizes the physical shortage in the palladium market. Note how the deficit became really significant after 2015. It puts the above figures in perspective. Since then the deficit is some 3,000,000 ounces.

This obviously has an upward pressure to the price of palladium. Even after a structural deficit of 6 full years it is worth noting that the price did not go ballistic. But what if it happens, does the (car) industry have enough time to switch to alternatives?

Not really, says Johnson Matthey, as it would take at least 2 years before substitution starts to have a significant impact on palladium demand, as per this Reuters article.

Palladium price forecast 2019: physical investment demand

Physical industrial demand for palladium may have shown structural deficits but still price did not react accordingly.

Part of the answer to this ‘mystery’ is to be found in the massive ETF outflows of physical palladium.

Whether this implies that palladium investment demand has weakened or not is irrelevant in this context, we just focus on physical flows.

Bloomberg noted that palladium ETF holdings have moved almost opposite to prices in recent years. “Since August 2014, investors have cut holdings by 71 percent, selling $2.3 billion of metal.”.

This becomes clear on below chart, courtesy of Sharelynx. The chart shows all physical palladium held by all palladium ETFs. Note how the volume of physical palladium held by ETFs literally crashed since 2014 from 3,500,000 ounces to 1,000,000 ounces today.

palladium physical holdings ETFs

Well, this is very interesting, as the 2,400,000 ounces that left palladium ETFs since 2015 lines up nicely with the 3,000,000 ounces deficit shown in the first chart above (industrial shortage).

Does it mean that the palladium ETF outflow was meant to close the gap of the supply deficit in the car industry (first chart)? We did not conduct the market research but the figures suggest the answer is yet.

But it seems that in 2019 the ETF outflow will have reached its limit, and the physical shortage will have no easy to fill the gap. What does this mean? All the conditions for a very bullish palladium price forecast for 2019.

Palladium to gold ratio as 2019 kicks off

At the same time, palladium prices are gaining on gold. Ed Egilinsky, head of alternative investments at Direxion, says that the historical, long-term relationship between gold and palladium is that gold is priced 2 to 3 times higher than palladium. The current ratio is a little over one. “It is possible for palladium to trade higher than gold if palladium supply continues to be muted, demand for autos and electronics increases, and tighter emission legislation further takes hold in China and the U.S.”

If we reverse this, and look at the historical palladium to gold ratio, we see an extremely enticing pattern. In chart terms it is called a rounding bottom. This one, particularly, spans over 15 years. That’s not your normal rounding bottom, it’s a giant formation.

Here is the big news: this rounding bottom is breaking out this year, and seems to be set to continue this trend in 2019. That’s a secondary indicator for us to conclude that our palladium price forecast for 2019 should be very bullish.

palladium to gold ratio

Moreover, gold seems to be setting up for a constructive period. Our best guess is that October till April will be mildly to wildly bullish depending on how the outflow from the bond market will play out.

In a gold friendly environment it certainly helps palladium prices move higher.

Palladium price forecast 2019: weekly chart

The weekly palladium chart has one falling channel and one rising channel. Earlier this year, in the May-June timeframe, the rising channel was invalidated. However, palladium is working hard now to get back in its rising channel.

Here is our conclusion: the $1125 price point is crucial for our palladium price forecast for 2019. Once above $1125 palladium is back in its rising channel. That is very bullish. On the other hand the all-time highs are $1125, so a break above it would be a secular breakout.

palladium price forecast 2019 weekly

[Ed. note: on April 14th, 2019 we added the following comment as well as up-to-date chart. This is the same weekly palladium price chart as the one outlined above.]

As of March, after the crash of palladium’s price, it is clear that the rising channel got violated. This is a time to wait-and-see, not try to outsmart the market.

palladium forecast 2019 weekly april

Palladium price forecast 2019: monthly chart

The monthly palladium chart confirms on the one hand the importance of the $1125 price level, in line with the findings on the weekly chart.

What the monthly adds as an additional insight is that a solid area was built in the $1100 to $920 area. That’s fundamentally different as the previous 2 instances when all-time highs were set: once in 2000 and once in 2017. Both were almost parabolic rallies which obviously were not sustainable.

The current rally, however, has some good foundation to build upon. We believe ‘this time is different’.

palladium price forecast 2019

[Ed. note: on April 14th, 2019 we added the following comment as well as up-to-date chart. This is the same monthly palladium price chart as the one outlined above.]

Palladium crashed in March 2019 only to invalidate its uptrend towards the highest band of the secular channel. We need to see 3 monthly closes above $1400 in order to be bullish again. The most concerning aspect in the current setup is the huge rejection of the the all-time highs with a bearish candle similar to the bullish candle the month before (in chart terms: ‘dark cloud cover’). However, the odds now favor a bearish resolution. This is a wait-and-see type of situation.

palladium forecast 2019 monthly april

Palladium price forecast 2019: a price forecast

With a supply deficit which is building up for 5 years, with a massive physical palladium exodus from ETFs which is reaching its limits, in a gold friendly environment, we see several primary and secondary indicators suggesting at much higher palladium prices to come in 2019.

The weekly and monthly palladium charts suggest a secular breakout is in the making. Moreover, the palladium to gold ratio, as a secondary indicator, is breaking out as well.

Platinum Group Metals’ Jones believes that palladium could climb to $1,200 this year and $1,400 in 2019 and wouldn’t need a new “catalyst” to get there.

InvestingHaven’s research team is on record with a palladium price forecast for 2019 of $1375 which likely will be a medium to long term top. It certainly is a profit taking price level if and once it gets there.

Our thesis is invalidated if the $1125 does not get broken to the upside, or if a breakout appears to fail.

 

** Update January 6th, 2019 **

Palladium price forecast materializing as 2019 kicks off

The price of palladium is taking off! It accelerates its rise. Our palladium price forecast is well underway!

MarketWatch writes in the first days of 2019: Palladium hits another record, inches closer to the price of gold. We find this quote quite relevant:

“Palladium has been on a multi-year run that shows few signs of abating. Palladium is close to becoming the most ‘precious’ of precious metals. Supply shortages continue to support palladium’s performance, with strong multi-year growth in palladium demand now straining a fixed supply. Palladium is especially scarce and its supply is inelastic since it is usually a by-product of ores that are being mined for other metals, like platinum and rhodium,” says John Ciampaglia, CEO of Sprott Asset Management, in a recent report.

When revising the chart featured in our palladium price forecast 2019 we see that palladium confirmed its breakout at the end of 2018. We said that palladium would go much higher in 2019.

Based on the up-to-date chart formation, and the fast rise in recent months, we now see that upside potential is limited as a test of the resistance area is near. We would say that the $1300 area makes for an exit point assuming it will be when palladium’s price touches resistance of its rising channel. That’s when a backtest to the breakout point at $1075 might take place.

palladium price Jan 2019

** Update February 17th, 2019 **

Palladium price forecast 2019: most bullish scenario underway

This is how we followed up on the palladium market after we published our initial palladium price forecast many months ago!

As our initial price target of $1300 as part of our palladium price forecast is already achieved the question comes up whether there is a higher price target!

The answer is YES. So as 2019 kicks off we are on record forecasting a much higher palladium price!

How high can the price of palladium rise? Our most bullish palladium price forecast for 2019 is that it will double.

What really strikes us most though is that silent character of this raging bull market! Yes, readers can check it out themselves by looking at the palladium price news stream. Hardly anyone talks about it, and certainly nobody signals that the palladium price may double in 2019.

At InvestingHaven we love silent bull markets for reasons outlined in great detail in our latest and greatest article 10 Tips To Master Investing Without Emotions

In this update on Feb 17th, 2019 we show two charts with extreme timeframes: quarterly and 4-hour palladium price charts.

The first chart is the quarterly.

Palladium has lots of upside potential in its highest band. As seen the top of the upper band comes in at much higher levels. Based on the rate of change of 9% per 2 years the top of the channel sits at $2474 at the end of 2019. It will probably be some sort of blow off top if and when we get there, which is why it is crucial to have an exit plan in place NOW before the herd wakes up and Joe-comes-late-to-the-party gets excited on social media!

palladium quarterly chart

The second chart is the short term timeframe: 4-hour chart.

It shows an amazingly juicy setup, and as said if palladium trades above $1420 it is transitioning from the lower band to the upper band in its secular rising channel. It would bring palladium much higher!

palladium intraday chart

The beauty of both charts is that they both confirm each other. Investors should get excited if and when timeframes confirm each other, it’s the best imaginable scenario possible. Confirmation means that the findings and future price targets align, which increases exponentially the odds of a forecast to materialize!

Because of this we feel strongly that our most bullish palladium price forecast 2019 is not only realistic but also will be realized!

** Update April 14th, 2019 **

Palladium price forecast 2019 in the process of being invalidated

The crash of palladium’s price in March of 2019 may invalidate our palladium price forecast.

As said in Palladium Crash Of 2019 Has More Legs? we see serious damage on the charts and patterns.

When it comes to the longer term we see the up to date weekly chart embedded above. The depth of the drop is too significant. It fell out of its rising tactical channel, and now also pierced back into its lower band of the secular rising channel.

This setup has a simple and clear message: the crash has more legs. Our forecast for 2019 is invalid. There may be another opportunity that palladium rises again, and may meet our price target at a later point in time. But it will _not_ be in 2019!

The only ‘wildcard’ that may turn things bullish again is the quarterly chart. It is still in bullish territory.

But the concern with the quarterly chart is that it diverges from the lower timeframes. A divergence between different timeframes is a red flag!

The weekly and monthly palladium charts became bearish. The quarterly still bullish. This divergence does not give the confidence we need to remain bullish on palladium. It is not responsible if we ignore the lower timeframes.

palladium forecast 2019 quarterly april

 

Where is the exit plan as part of the palladium price forecast?

Note that we started talking about an exit plan already several months ago. At the early stages of this raging bull market we already spoke about exit points.

The reason to do so is that it avoids investors getting too emotional (at the irrational exuberance stage) and follow the herd (driven by financial media which is mostly confusing investors).

As shown in above charts the ultimate exit point seems to be $2474 at the end of 2019. But if palladium accelerates its rise and touches the resistance line before the end of 2019 our price target should be lowered. The opposite is true as well!

[Ed. note: on April 14th, 2019 we add that the $2474 is not valid any longer for 2019. It may get center stage at a later point in time. With the palladium crash of March we believe the uptrend is invalidated. The exit plan to $2474 is something we do not want to pursue from a risk / reward perspective until further notice.]

 

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