Ask palladium traders, and they’ll tell you that the semiconductor shortage isn’t just punching the automotive industry in the gut. There could be signs of life, however, with a recent technical rebound amid a rallying dollar.
Monday’s trading session saw the dollar gain strengthen as investors expect the Federal Reserve to follow through with its stimulus tapering measures. As a CNBC report noted, “Palladium advanced 1.6% to $2,110.93 per ounce, with analysts attributing the bounce to short-covering after recent declines, while platinum was last down 1.8%, to $1,008.17, after hitting a 2-month peak earlier.”
The report also said that palladium could be hitting a technical rebound as it touches its support levels (around $1,870). For the past few years, palladium was on a tear until a semiconductor shortage this year began affecting the auto industry, which relies on the metal to make emissions control systems.
“Fundamentals haven’t changed much with auto sector continuing to face challenges due to micro-chip shortage. Until we see auto production recovering meaningfully, which will depend on availability of semiconductors, we expect PGMs (platinum group metals) to remain volatile,” said ANZ analyst Soni Kumari.
Two Metals, Two Options
Investors expecting palladium prices to turn around can opt for the Sprott Physical Platinum and Palladium Trust (SPPP). SPPP provides a secure, convenient, and exchange traded investment alternative for investors who want to hold physical platinum and palladium.
Another option is to play a rebound with gold prices. ETF investors can accomplish this with funds like the Sprott Physical Gold Trust (PHYS).
PHYS primarily invests in physical gold bullion in London Good Delivery bar form. It offers investors the ability to hold gold without having to store the physical metal itself.
The performance of the dollar will continue to weigh in on gold prices for the rest of the year. A risk-on sentiment returning in 2021 alongside a rallying greenback has held gold prices down for much of the year.
“The dollar is the main factor,” said Edward Moya, senior market analyst at brokerage OANDA.
However, the tide could be turning for the precious metal.
“The downside pressure on gold is starting to near its end, and we are approaching a peak where gold can finally stabilize and ultimately regain its historically longer bullish trend,” Moya added.
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