In 2022, Palladium’s War Premium Was in the Bag. But then, the Bag Split Open

In 2022, Palladium went from record high to multi-year low. The Ukraine war made the selloff hard to see coming… but not impossible.

by Nico Isaac
Updated: December 23, 2022

No matter the faith, for billions of people across the globe, December is a month filled with celebrations founded on stories of magic and miracles. Whether it be of a chubby, bearded man riding a flying sleigh driven by enchanted reindeer, or a smiling Buddha reaching Nirvana after three days of sitting beneath a giant fig tree, or a single cup of oil enough to light a candle for one day, somehow lasting for eight straight days and nights -- these folklores and traditions have endured cultural, technological, and social tidal shifts as if preserved in amber resin.

These stories, while flubbing the facts, are beneficial. They protect children's innocence and fortify familial bonds.

But not all belief systems should be protected, as they can cause more harm than good. Case in point: The widely held belief in the news-driven model of financial market analysis. It goes like this: price trends are controlled by external factors such as weather patterns, economic data, political events, Fed policies, and so on, broadly known as "fundamentals."

And yet, every day there are countless examples of this belief system NOT being supported by reality. For example, the 2022 performance in palladium.

In early 2022, palladium prices were on a tear as industry reports recorded a global supply deficit. And then the second shoe dropped when, in late February, Russia, a major palladium-producer, declared an un-prompted war against Ukraine.

That conflict, according to mainstream experts, would be the spark to light palladium's bullish keg, as these March 4 headlines recall:

• "Palladium hits 7-1/2-month peak as Russia-Ukraine conflict deepens" -- Reuters
• "Palladium sprints to $3,000/oz mark as Russia supply fears grow" -- CNBC
• "Palladium Eyes Record Prices As Russia Ukraine War Looks to Deepen Supply Deficit" -- MarketWatch

From Business Day on March 7:

"Palladium was up 4.3% at $3,130.16 per ounce, after hitting an all-time high of $3,172.22 earlier in the session. Russia accounts for 40% of global production of the autocatalyst metal, used by automakers in catalytic converters to curb emissions.

"We're looking at a very significant pickup in concerns around the disruptions with Ukraine seemingly because the conflict is showing signs of broadening,"

The Russia-Ukraine conflict did indeed broaden, and yet, the wind died out of palladium's sails and sent the metal hurtling downward for the remainder of 2022. (Much like that scene in "Elf" when Santa's sleigh comes crashing down after the world stopped believing in him. On my top 10 Christmas movie lists!)

If there was a time for the "fundamental" story of market analysis to prove itself true, it was here: a global shortfall and war-driven supply shock should have propelled palladium higher.

But it didn't. Which leads to a logical conclusion: The news is not driving the market's trend.

Investor psychology, which unfolds as observable Elliott wave patterns directly on price charts, is.

Here, we approach the 2022 meltdown in palladium from the Elliott wave perspective. On March 8, our Metals Pro Service showed this chart of palladium. There, we identified a complete uptrend and prepared the bearish way forward:

"It seems like wave ((c)) of Y is over. Falling lower would open the door to considering either that price was topping... Broadly, I am viewing the rise of palladium as a double zigzag in its final wave up."

And, this next chart captures palladium's 50% selloff to 2-and-1/2 year lows that followed:

Whatever your faith, winter holiday stories of miracles and magic open our minds to the impossible.

But for market goers, the most amazing gift is to realize the possibility of successfully navigating financial markets.

Elliott wave analysis is not foolproof, and every market carries risk. But if you're seeking a model of market analysis based on objective price patterns, and one that can identify clear make-or-break price levels, then our Metals Pro Service may be the beginning of a new chapter of financial independence.