From the Desk of Ian Culley @IanCulley
I left gold bugs an urgent message last week.
“This mess could turn downright ugly for the entire precious metals space if buyers don’t step in and support higher prices in palladium – and fast.”
I am many things, but “alarmist” isn’t one of them. I simply find it hard to believe gold will post new all-time highs while palladium falls to fresh five-year lows.
Call me crazy, but those two puzzle pieces don’t seem to fit.
Perhaps we’ll never know for sure, as buyers showed up right on cue, driving palladium higher ahead of the three-day weekend.
Last week’s strength bodes well for all metals, industrial and precious. So I’ll reiterate critical levels to trade against in palladium.
But I also want to share a strong correlation between this multifaceted metal and a market I would never have guessed…
The Nasdaq 100 $QQQ!
Check out these charts Bartelloni shared with JC, revealing the relationship over a decade ago.
(Big thanks to Jan for bringing the article to my attention!)
Here’s an updated look at the Nasdaq 100 overlaid with palladium futures with a rolling 26-week correlation study in the lower pane:
Yes, the positive correlation has decoupled since last fall. But the relationship stands over longer time frames.
Clearly, palladium and tech stocks trend in the same direction more often than not.
And, based on tech’s recent performance, I’m betting the Nadsaq 100 has it right!
When this positive correlation gets back on track, I imagine it will lead to higher palladium prices, not cheaper tech stocks.
The futures contract printed a potential failed breakdown last week after briefly undercutting the 2020 and March 2023 pivot lows.
It’s an interesting coincidence as tech continues to catch higher.
Regardless, the former 2020 lows at approximately 1,355 mark an excellent level to define our risk for palladium.
My outlook points higher toward 1,830 as long as it holds above that level.
On the other hand, the Physical Palladium ETF $PALL has yet to recover crucial lost ground:
The bulls’ impressive display of strength fell short despite driving a 6 percent gain last week.
If and when buyers push price above 138, I like it long with a target of 275.
It’s likely only a matter of time before we witness PALL take back those former lows, considering palladium futures have regained their respective level.
To be clear, it’s still messy across the precious metals space. One week of gains can’t erase that fact.
Overhead supply remains in place for gold, silver, and the lot.
But last week’s pop in palladium and the recent rebound in Dr. Copper and rebar futures might be just what gold bugs need to help lift their shiny yellow rock to new all-time highs.
Stay tuned!
Click here to watch this week’s Gold Rush Video:
Thanks for reading.
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And be sure to download this week’s Precious Metals Report below!
Allstarcharts Team
