TECHNICAL-Palladium’s “golden cross” signals near-term gains
* Palladium up 3 pct in 2013, lone gainer in precious metals
* “Cross” seen bullish on prices in next 3-6 months -analyst
* Open interest in U.S. futures near 1-1/2 year high
* Has met strong resistance at $780 six times in 2013
By Frank Tang
NEW YORK, Nov 19 (Reuters) – A “golden cross” set to form on palladium’s chart suggests the autocatalyst metal has room to rally in the next several months, reflecting fund buying on hopes of a better economic outlook, analysts said.
On Tuesday, spot palladium’s 50-day moving average was poised to break above its 200-day moving average, a highly bullish formation known as a golden cross, as the metal rose 0.5 percent to around $720 an ounce to snap a two-day decline.
(For a chart, click link.reuters.com/sev74v)
“The 50 crosses above 200 illustrates continued demand from institutional investors,” said Adam Sarhan, chief executive of New York-based Sarhan Capital.
“The golden cross is a good intermediate- and long-term signal for further strength. Typically, the market’s higher in 3-6 months out, if not longer,” Sarhan said.
Palladium, with auto catalytic converters representing two-thirds of total demand, is one of the few bright spots in precious metals.
Year to date, palladium is up almost 3 percent, standing in sharp contrast to platinum’s 8 percent drop and gold and silver’s 24 and 33 percent losses respectively.
While platinum is a more effective catalyst and often required in diesel engines to clean tailpipe emissions, the less-expensive palladium is more widely employed in gasoline vehicles.
Some analysts said platinum has underperformed palladium because of the still lackluster European market, in which most vehicles are diesel-powered.
FUNDS BULLISH ON ECONOMIC HOPES
Strong institutional investment demand in U.S. palladium futures <0#PA:> is reflected as open interest, a liquidity gauge, hovered near a 1-1/2 year high.
Palladium held by exchange-traded funds, however, were down 15 percent at 1.65 million ounces from a 2013 peak of 1.95 million ounces set in March.
“Just because the stock market is doing well, palladium is doing more decently relative to the other precious metals because of its industrial uses,” said Rick Bensignor, head of trading strategy at Wells Fargo Securities in New York.
Earlier in November, precious metals specialist Johnson Matthey forecast China’s strong appetite for cars and lower supplies from the depleted Russian state stockpile should keep the palladium market in a deficit of 740,000 ounces in 2013.
Renewed supplies worries from South Africa, which accounts for nearly 40 percent of annual mine output, should also underpin palladium prices after the country’s utility Eskom declared a power emergency on Tuesday.
Prices have largely traded in a range between $640 and $780 an ounce this year. It has rallied toward heavy technical resistance in an area from $760 to $780 six times since January but has failed each time.
Bensignor said that palladium’s unique sideways pattern this year and the DeMark trend-momentum model suggest that the metal will most likely not hit a bottom until Friday.
“It would make me think that I probably would not want to buy for a few more days,” said Bensignor. (Reporting by Frank Tang; editing by Andrew Hay)
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