Shorting Palladium… Again

It’s not often that one gets an opportunity to execute the exact same trade based on the same investment thesis after closing out the initial trade profitably. But that is exactly what I am facing and decided to take advantage of by shorting Palladium last Friday at $802.

My first trade was initiated on March 27, 2015 at $742 per ounce and closed on November 25, 2015 for $540 per ounce. My rationale for that trade can be read here, so I won’t rehash anything that was stated in that post.

I will only add that we are closer to the mass production of electric vehicles, with the Chevy Bolt EV just released and the Tesla Model 3 coming out later this year. A drop-off in gasoline-powered car sales will reduce a major source of demand for palladium.

It’s interesting to note that the Palladium market is the only commodity that has remained resilient in the midst of a commodity bear market. The recent improvement in global growth has helped palladium to rally back close towards its mulit-year high price of just over $900/ounce.

But when (not if) China experiences another slow down, global growth will weaken and palladium prices will come under pressure, falling towards $500/ounce.

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