PALLADIUM TODAY – Expect prices to recover, aided by strong autosales

Short Term: Medium Term: Long Term: Resistances: R1 635.50 April high R2 636 20 DMA R3 710-719 Former highs R4 642 Channel top R5 724 Oct high R6 727 Recent high R7 747.50 High so far Support: S1 664 38.2% Fibo S2 651 Sep lows S3 638 50% Fibo S4 636 20 DMA S5 631 Oct 14 low S6 612 61.8% Fibo S7 608 Low so far S8 570 June 08 high S9 528 June low S10 452 January low Stochastics:Bullish, but converging Legend: MACD = Moving average convergence divergence Fibo = Fibonacci retracement line (H)SL = (Horizontal) support line BB = Bollinger band DMA = Daily moving average H&S = Head-and-shoulder formation Technical Comment Analysis Spot palladium prices have attempted to get some lift in recent days but prices are under pressure again now. Prices were turned lower before they could get back above the 20 DMA. The move above the April peak reflected concerns about the possibility of strikes in South Africa. With a strike now off the table, the correction has been significant. We have been looking for support in the $620-600 area; so far the low has been $608 per oz. Macro factors With strikes off the agenda in South Africa, a correction was to be expected. But better economic data and a strong auto market should be good for demand so we are looking for bargain hunting to emerge before long.    With new three-year wage deals in place, South Africa’s platinum industry should see some stability. With the wage issue now out of the way the market can now focus on the fundamentals again, where we would expect better economic data, especially after the recent PMIs as well as strong vehicle sales in China, Europe and the US. US total vehicle sales picked up to an annualised rate of 18.3 million units (mu) from 17.8 mu in September. US vehicle sales start to dip in December last year but hit a low point in March and June and have since been working higher again. At 18.3 mu, sales were higher than last year’s peak of 18.2 mu in September, October and November. Since autocatalysts are the main market for palladium, strong vehicle sales are all-important. Some buying by investors is starting to show up in the ETFs again. Conclusion Palladium prices have adjusted to the wage agreement in South Africa. The market is likely to be in a deficit and continuing strong auto sales, which are far better than forecast, bode well for demand – we would expect prices to work higher again before too long. All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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