Palladium is making a huge correction from $1850 support. The price recently passed %23.6 Fibonacci level with a huge gap. But is this just a correction or a full recovery? To answer this question, market sentiment and market demand need to be checked.
Palladium market balance has been negative since 2011 and this is not changed since. But as we talked about in our old post from February, most of the palladium demand is coming from automakers and the chip shortage affects the automaker most. Slowing demand both from autocatalyst and industrials in 2020 made a delayed reaction on the price in 2021 combined with weaker investment demand. Despite that market, balance narrowed but remain in deficit. Recent data shows the 2021 deficit starts to widen again and the price may get a delayed reaction again in the coming months.
On the investment side, the situation is a little bit different. ETF holdings decreasing since 2015 but from 2020 turned flat. Net positions however turn negative for the first time since 2003. But unlike gold and silver, palladium is a more industrial metal than an investment metal and can take selling in the financial markets better as seen in the chart. Also, if the negative position turned positive, investors start buying this might give the palladium the boost it needs.
Despite getting a better fundamental outlook, a major downtrend channel is still ongoing. As before, the price may get a delayed reaction and further upside might take some time. $2200 is a major resistance bot horizontally and trend-wise. But if XPDUSD is able to hold above the Fibonacci %23.6 and break the trend with the %38.2 level, another bullish wave may follow. This is just a correction for now but may turn into a full recovery to a new ATH if fundamentals continue to support the metal.