In terms of the commodity complex investors and traders have never been more bullish commodities are a bullish extreme and we would expect them to correct to the downside. Rising US yields are bullish for the USD and bearish for commodities. In this article, we will look at the outlook for the white metals platinum and palladium in terms of the fundamentals, sentiment and the key technical levels
Traders Have Never Been More Bullish Commodities
The latest BofA FMS shows investors are holding their highest allocations ever on the chart below. The last time these levels of optimism were reached brent oil was over $100 but the global economy is in worse shape now than back then.
Traders and investors have bought commodities due to the view that the global economy will make a strong recovery this year but this view is now discounted in the price but there is another reason to be bearish of commodities: The USD looks set to rise as bond yields firm up. As we have pointed out in previous posts US bond yields rising is bullish for the USD and bearish for the commodity complex generally.
In the short term, Palladium prices spiked after Russian mining giant and the world’s largest palladium producer Nornickel said that its nickel, copper, platinum, and palladium output could be 15-20% than their forecasts at the start of the year. In terms of the spike:
“The price could make further gains in view of the tight physical supply situation. Indeed, the situation could soon tighten even further as sales of new cars are likely to be given a boost when the corona-related mobility restrictions are lifted in Europe, which is expected to happen soon” (Eugen Weinberg Commerzbank) The same argument is put forward for platinum as both metals are heavily used in the automotive industry. There is no tight supply and demand longer term in our view and the lifting of mobility restrictions is overstated in terms of new vehicle demand.
Speculators are heavily long of both platinum and palladium and we now expect them to get hit on stop and pressure both white metals lower. Below is our technical view and the key levels of support and resistance.
Technical Analysis Platinum
On the chart below we recent rally above 1200.00 ha failed and we are back below the level and looking for more weakness down to major support levels indicated only a close above second level resistance would negate our bearish view.
Technical Analysis Palladium
We have seen a big price spike to the upside on high volatility and after spiking through 2700.00 we have now fallen back from the 2700 level. We now expect a move down to levels of support indicated on a clear break of 2600.00. If we were to spike higher again we would look for the 2700 level to hold prices – A close above 2700.00 would negate our bearish view.
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