Palladium's Next Big Move Is Here: Golden Cross and Wave 5 Point To A New Bull Run
News Summary
After two years of neglect and a 70% collapse from its 2022 peak, the palladium market is showing strong signs of recovery. Technical analysis reveals a rounded-bottom pattern, with prices breaking above the two-year resistance level of $1,290. A “golden cross” has appeared on the weekly chart, where the 26-week Simple Moving Average (SMA) crossed above the 104-week SMA, historically a reliable signal for a long-term uptrend reversal. Elliott Wave theory suggests palladium is entering Wave 5, the final impulse in its 17-year bull market cycle. Institutional capital inflows into palladium ETFs, such as PALL, have been consistently robust, with nearly half a billion dollars flowing in over the past three years, indicating “smart money” accumulation during the downturn. Futures market data shows crowded speculative short positions, particularly with the top four traders controlling over 30% of all shorts, setting the stage for a potential short squeeze. Combined, these indicators point to a price target range of $2,000 to $3,000, signaling a new bull market cycle for palladium.
Background
Palladium was a star performer in the last commodity cycle, surging over 500% from its 2016 low to its February 2022 peak above $3,000. This rally was fueled by tighter emissions standards, strong automotive demand, and years of supply deficits. However, as the post-pandemic economy cooled and automakers shifted to cheaper alternatives, demand fell sharply, causing palladium prices to tumble over 70% in just a few quarters, erasing years of gains. This led to widespread market pessimism, but the article posits that this collapse was merely the start of a long reset, with the market shifting from fear-driven liquidation to patient accumulation.
In-Depth AI Insights
What does the disconnect between prevailing market sentiment and actual fund flows in palladium signify? - Despite widespread pessimism, sustained institutional investor (”smart money”) accumulation through ETFs suggests conviction in palladium's long-term structural tightness and cyclical rebound potential. - This divergence often occurs at market bottoms, signaling that fundamentals, rather than short-term sentiment, will drive the next phase of appreciation, offering early entry for patient capital. - The crowded short positioning, especially in a thinly traded market like palladium, sets the stage for a violent short squeeze if prices begin to climb, which could dramatically accelerate the uptrend. How might the characteristics of an Elliott Wave Wave 5 influence investment strategies? - Wave 5 is typically the final impulse of a bull cycle, characterized by a rapid return of optimism, but it can be more sentiment- and positioning-driven than Wave 3, warranting caution regarding its potential “euphoric” nature. - Given the projected target range of $2,000-$3,000, investors might consider a phased profit-taking strategy, particularly as prices approach historical peaks, to account for Wave 5's potentially shorter duration or increased volatility. - Long-term investors should re-evaluate their exposure, potentially scaling back positions as market sentiment becomes overly bullish to mitigate the risk of a cyclical top reversal. Beyond the risks mentioned in the article, what unconsidered factors might influence palladium's trajectory? - While automotive demand is crucial, the long-term global transition to Electric Vehicles (EVs) could pose a structural challenge to palladium, a key component in internal combustion engine catalysts, despite short-term supply constraints and emission standards providing support. - Geopolitical risks from Russia, a major palladium producer, and potential supply disruptions, or trade policies from the Trump administration, could have unpredictable impacts on the supply side, acting as both risks and potential price catalysts. - The correlation with other precious metals like gold and platinum, as well as shifts in global central bank monetary policies, could influence investor appetite for the broader commodity complex, potentially overriding palladium’s specific supply-demand fundamentals.