Palladium May Extend Gains to Test 2011 Peak: Technical Analysis

March 11 (Bloomberg) -- Palladium is set to extend gains to test the 2011 peak after breaching its 21-day moving average, according to Kaname Gokon at commodity broker Okato Shoji Co.

“The 2011 high of $862.25 may be challenged this year after breaking above the short-term moving average of $747.80 an ounce on March 7,” Gokon, deputy general manager of research, said today. The metal touched $786 on March 8, the highest level since September 2011.

Palladium has outperformed platinum, gold and silver this year, climbing 10 percent. Demand will exceed mine output for the second-straight year in 2013 with a shortfall of 620,000 ounces, and will remain in deficit through 2018, Morgan Stanley said in a report on Jan. 24. The metal, together with platinum, is mainly used in vehicle pollution-control devices and jewelry.

The discount to platinum will probably narrow to test the lowest level since Dec. 29, 2011 of $743, from today’s $828.75, Gokon said.

“This is partly reflecting an increase in demand for palladium for use in auto catalysts to replace more expensive platinum,” he said.

Autocatalysts accounted for 65 percent of palladium demand in 2012, according to Barclays Plc’s investment-banking unit. Palladium for immediate delivery declined 1.1 percent to $774.75 by 2:42 p.m. Tokyo time. Platinum was little changed at $1,603.50 an ounce.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

--Editors: Jarrett Banks, Brett Miller