Palladium sets records. Forecast as of 07.03.2022


Russia is looking for alternative routes for palladium exports due to Western sanctions. As a result, prices are increasing. How high can they hike? Let us discuss the Forex outlook and make up a trading plan.

Monthly palladium fundamental forecast

The price of any asset is determined by supply and demand. The recovery of the global economy after the pandemic has led to an increase in global demand for commodities, to expectations of their supercycles, which contributed to the increase in value. The war in Ukraine added fuel to the fire. Supply chain disruptions and supply problems for oil, gas and other goods exported from Russia have allowed the Bloomberg Commodity Spot Index to rise to new all-time highs due to anti-Russian sanctions. During COVID-19, Bitcoin and other cryptocurrencies were the growth leaders, and now it’s time for commodities!

Commodity index dynamics

Source: Bloomberg.

The work of the foreign exchange market is characterized by the principle “the farther from the zone of military conflict, the better”, which leads to massive sales of European monetary units. For the commodity market, the opposite is true. The closer to the war, the faster prices rise. Therefore, one should not be surprised at the more than 40% increase in the cost of wheat exported by both Russia and Ukraine in the week ended March 4. Investors also paid attention to one of my favorites, palladium. The cost of XPD following the results of the trading week increased by almost 18%. This is just the beginning!

Weekly dynamics of raw materials

Source: Bloomberg.

XPDUSD soared to new all-time highs after statements that Moscow is confident that the goals of the military operation will be met, while the US and its allies are discussing the possibility of a ban on Russian oil imports. Both Russia and the West intend to go all the way, so the commodity boom is likely to continue.

Palladium is used in the production of catalytic converters in the automotive industry. More than 40% of world production comes from Russia. Norilsk Nickel carries out transportation to its main trading partner, the German company BASF SE, by air. The fact that Europe has closed its airspace to Russia due to the war in Ukraine is disrupting supply chains and helping XPDUSD soar above $3,300 an ounce. This is significantly higher than my $2500 forecast. However, few could have imagined such a radical change in the geopolitical situation, and how large-scale Western sanctions would be.

Problems with the supply of palladium by plane arose at the beginning of the pandemic, leading to a price hike. Norilsk Nickel is currently exploring alternative routes for XPD delivery to its customers. It is unclear whether the routes will be redirected or exports will be oriented to China or other countries. This contributes to further price increases.

Palladium trading plan for a month

In my opinion, until the war in Eastern Europe is over, it is impossible to talk about the end of the boom in the commodity market. Russia intends to achieve its military goals within three weeks. Ukraine will resist. So the potential of the XPDUSD rally is far from exhausted. Palladium is able to rise to $3600 and $3800 per ounce. I recommend entering purchases.

Price chart of XPDUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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