A trader speaking on anonymity contacted us today to send a message to our readers about activity within the palladium markets.
“Last time we spoke I reiterated my stance on palladium when it was trading around $600. On June 28th of this year I let you and your readers know I started buying palladium at $560. For those fortunate enough to have bought at those levels as well, congrats, you have done well. Now I’d like to do what most don’t, suggest a sell point. I’m currently taking at least 50% of that position off at the moment.
We are so close to the fiscal cliff in the US, we can see over the edge, and that is concerning for everyone in this country, whether they realize it or not.
The inventory levels coming out of Ford and GM caught my attention recently. GM is reporting roughly 139 days worth of inventory. That’s almost five months worth of vehicles on dealer’s lots. Recent news from our sources in the automotive industry have auction sales down nationwide which could mean that the extent of the Sandy recovery has been met, and the damage that was actually done to the automotive inventory levels may have been exaggerated, time will tell.
China’s PMI came out above the 50 mark today, causing a short term spike in their markets, but then a quick sell off which took it negative once again. Our ISM here in the US was below that key level at 49 ½, on expectations of a number over 51, showing no expansion but contraction instead. These are concerning levels in the midst of all the uncertainty, especially after having an increase of over $100 and palladium being a top performer for the month of November.
I have also been hearing palladium being discussed by more talking heads on television than ever before, so I remain bullish long term. However, the reason this worries me short term is the same, media sending retail investors to a metal that can be violent and discouraging. It is a very thin market which makes it vulnerable to huge swings that most can not handle. The volatility of palladium, mixed with the addition of inexperienced investors is why I feel there will be more attractive entry points in the near future.