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Resilient Trader is where smart traders come for high-conviction insights, tailored for busy retail investors. Today’s setup? A rare opportunity in a precious metal trading below production costs - with a demand catalyst that’s just getting started.
🔍 Trade Thesis: Palladium Is Trading Below Production Costs While Hybrid Demand Surges
Palladium has collapsed from a high of $3,002 in 2022 to around $950 today. At these levels, it’s trading below the cost to produce - while demand is ramping up, especially from hybrid vehicles. $PALL ( ▼ 3.35% )
Why we like this setup:
📉 Futures price: $957/oz (PALL ETF: $88.80)
⛏️ Production cost: $900–950/oz - current price is unsustainable long term
🚗 Hybrid car boom: Market share projected to grow from 3% to 23% by 2025
📉 Supply deficit: 3-year shortfall of 1.75M oz and counting
🧨 Miners can’t keep producing at a loss forever
📊 The Fundamentals Are Compelling
80% of palladium is used in catalytic converters - and hybrids use more, not less
2023 Deficit: 749,000 oz
2022 Deficit: 527,000 oz
2025 (Projected): 470,000+ oz shortfall
ETF: Trades at roughly 1/10 the futures price - currently $88.90
📐 Valuation Is Historically Depressed
⚖️ Gold-to-Palladium Ratio: Over 3:1 - extreme by historical standards
⛏️ Production Cost Ratio: Palladium almost never trades below cost
⏪ Reversion Potential: Past dips below cost have led to sharp rebounds
🧭 Technicals Show Bottoming Pattern
🔻 Strong support: $850–900 (Futures), $85–90 (PALL ETF)
📈 RSI divergence forming
🔄 8-year cycle low could be in
Targets:
🎯 Short-term: $1,000–1,050 (Futures), $100 (PALL ETF)
🎯 Intermediate: $1,200–1,300 (Futures), $120–130 (PALL ETF)
💥 Trade of the Week: Calendar Spread for Leveraged Upside
✅ Buy $PALL ( ▼ 3.35% ) @ 88.80
Or implement the Options Trade
A calendar spread lets us play for the upside while reducing our cost basis.
✅ Buy Sep 19 $100 Call for $4.40
❌ Sell May 16 $95 Call for $0.80
💰 Net Debit: $3.60
🔻 Max Risk: $3.60
📈 Breakeven: ~$103.60
🚀 Upside: Big payoff if Palladium rises after May
🛠️ Why this works: Lower cost now, but full exposure through September
🚀 Catalysts on the Horizon
Keep a close look on:
❗ Production cutbacks are inevitable below cost
🚗 Hybrid vehicle growth + potential EV subsidy cuts
🌍 Geopolitical supply risks (Russia, South Africa)
📈 Breakout above $95 ETF could attract momentum buyers
🛑 Risk Management Tip
📍 Set a stop-loss at $82 on the ETF (~$820 on futures) to protect your downside while allowing room for natural volatility.
🧠 Final Thoughts
This is one of those rare asymmetric setups we love:
Trading below cost
Rising demand
Supply constraints
Technical bottoming
We’ll be watching this one closely.
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Stay liquid my friends…,
- The Resilient Trader
