PLATINUM TODAY – Support finally found

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In Bullion Desk News
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Short Term:
Medium Term:
Long Term:
Resistances:
R1966 20 DMA
R2970 DTL
R31020 June 08 peak
R41090 May peak
R51195 High so far
R61207 H&S target
R71289 Jan ’15 peak
Support:
S1966 20 DMA
S2957 61.8% Fibo (2016 rally)
S3954 June low
S4937 April low/HSL
S5923 Low so far
S6911 HSL
S7811 Jan low
S8807 Support 2004
S9745 2008 low
Stochastics:Rebounds
Legend:

Fibo = Fibonacci retracement level
DMA = Daily moving average
BB = Bollinger band
(H)SL = (Horizontal) support line
UTL = Up trend line
H&S = Head-and-shoulder pattern

Technical Comment

Analysis

  • The pullback in platinum prices was relentless between mid-August and mid-October. Spot prices have since found support around $926 per oz and in recent days have managed to rebound.
  • The sell-off created an oversold situation, we feel; we expect prices to recover.
  • The stochastics have turned higher.

Macro factors

With wage agreements apparently in place in South Africa’s platinum industry, the latest threat of strikes has passed. Last week we wondered if this was going to be a ‘sell the rumour, buy the fact’ situation. This seems that has been the case. 

The funds’ gross long position had become very extended, peaking at 65,259 contracts on August 9. The previous peaks were around 55,000-59,000 contracts. The position was 48,218 contracts on October 18. The gross short position had fallen to a low of 9,310 contracts on August 9; it has since climbed to 26,781 contracts, having climbed 4,136 contracts last week. With prices pulling back $269 per oz from the high and back at levels seen in February, it looked as though the market fully discounted the likelihood of no strikes. Given the build-up in the gross short position, there may now be short-covering.

Better economic data plus strong vehicle sales bode well for PGM demand. Platinum’s $308-per-oz discount to gold prices is also likely to make platinum jewellery look relatively attractive from a pricing perspective.

Conclusion

Prices have corrected more than we thought they would, especially with robust European car registrations and a market in deficit. The price correction made sense if strikes are unlikely but the extent of the pullback looks overdone. 

Given how far prices have fallen, we would have thought that physical demand and investment demand would be hunting bargains. Given platinum’s price discount to the gold price and the oversold appearance, we would now look for prices to work higher.

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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Source: Bullion Desk News

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