Palladium bid falls below $1,000 for the first time in months ahead of Fed decision

Palladium's dealer bid printed $994 an ounce on Tuesday morning, Oct. 27, the first print below $1,000 in months. Five straight daily losses last week took the metal from about $1,096 to $1,026, a drop of about 6.4%.

The Federal Reserve decision on Wednesday, Oct. 28, and the possibility of Russian supply headlines will decide this week whether $1,000 holds or the metal moves toward $950.

1. Where palladium stands

Palladium opened the week of Oct. 19 near $1,099 and touched a weekly high of $1,160 on Monday. It then fell every session: $1,085 on Tuesday, $1,066 on Wednesday, $1,036 on Thursday and $1,026 on Friday, with the low at $1,020.

Thursday's range of $1,128 to $1,031 showed how thin the market became once the liquidity scare hit. Dealer spreads widened to close to $50.

A rally on Sunday, Oct. 25, on reports of possible Group of Seven restrictions on Russian industrial metals, lifted the price about 2%. It lasted one session. Monday closed near $1,027, and Tuesday traded between $994 and $1,085 with the bid at the low end.

Over longer windows, palladium is down about 18% over 30 days, 29% over 60 days and 28% from a year ago, at roughly half its level of five years ago. A platform that quotes palladium needs both sides of the market in a week like this, which is what a palladium price API with live bid and ask provides.

2. Catalysts this week

2.1 Federal Open Market Committee decision, Wednesday, Oct. 28

Last week's selling came through the liquidity channel. A spike in oil prices revived inflation concerns and raised market pricing for a December Fed hike, a pullback in technology shares pushed investors to raise cash, and palladium, with a fraction of gold's liquidity, moved further on less volume.

A Fed statement that plays down the oil shock would ease that pressure. A hawkish statement would keep it on.

2.2 U.S. PCE inflation, Thursday, Oct. 29

The personal consumption expenditures price index, the Fed's preferred inflation gauge, is due the morning after the decision. A hot core reading would support the hawkish case and would likely push palladium through $994; a soft reading would give the metal room to bounce.

2.3 Russian supply headlines

Russia produces about 40% of the world's mined palladium, almost all of it from Nornickel, which has guided to its lowest output since at least 2005.

Sunday's rally showed the market still reacts to sanctions talk; Monday's reversal showed it will not pay for the possibility in advance. A concrete Group of Seven or U.S. measure this week would be the largest upside risk for any metal in the complex.

2.4 Demand data and forecast revisions

Autocatalysts for gasoline engines take about 80% of palladium demand, which is why electric vehicle adoption and soft Chinese car sales weigh on the metal.

Forecasters are split. Johnson Matthey sees palladium moving into surplus this year, while Metals Focus still expects a deficit of about 376,000 ounces. Price targets range from BMI's $1,400 to Metals Focus's $1,570, both well above spot. A further forecast cut this week would add to the pressure.

2.5 China purchasing managers indexes, Saturday, Oct. 31

China is the largest car market and a major buyer of palladium for autocatalysts. A weak manufacturing PMI on Saturday would reinforce demand concerns; a strong reading would help sentiment without changing the demand picture.

3. Levels to watch

• Support: Tuesday's low at $994 and the $1,000 level are being tested now. A daily close below opens the way to $950, which has not traded since the spring lows.

• Resistance: The $1,085 to $1,100 zone where last week began is the first hurdle. Above that, Monday's high at $1,160 would need to be reclaimed to end the slide.

4. Scenarios for the week

Higher: back above $1,085

A dovish Fed, a soft PCE reading and a concrete announcement on Russian metal restrictions would combine macro relief with the supply story. In a market this thin, that could retake $1,085 in a session or two.

Lower: test of $950

A hawkish Fed and a hot PCE reading, with no sanctions news and equities under pressure, would push palladium through $994. Below $1,000 there is little technical support until $950, and wide spreads mean the move could be fast.

Base case: volatile around $1,000

Metal Sentinel's base case is a week of 2% to 4% daily swings on either side of $1,000, with the Fed and PCE pulling in different directions and sanctions headlines producing short-lived spikes.

5. Last week by the numbers

6. What to watch

Palladium has the most binary setup in the complex this week. A supply risk that is real but not priced sits against a demand picture that is weak and well known, and the macro calendar will decide which one the market trades.

Metal Sentinel's palladium price API publishes live bid, ask, high and low prices in more than 180 currencies. For the rest of the complex, see the gold market recap for Oct. 19-23.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always perform your own due diligence before investing in precious metals.