PLATINUM TODAY: Prices consolidate, fund interest improves

Jun 12, 2017 - 2:38 PM GMT
by

Short term: Up
Medium term: Up
Long term: Up
Resistances:
R1   945  20 DMA
R2   967.50 Recent high
R3   990.50 April 17 peak.
Support:
S1   945  20 DMA
S2   931  SL
S3   925
S4
S5
  894 Recent low
889 Dec low
Stochastics:
Bearish

 

Legend:
BB = Bollinger band
HSL = horizontal support line
SL = support line
MACD = moving average convergence divergence
DTL = downtrend line
UTL = uptrend line
H&S = head-and-shoulder pattern

Analysis

  • Platinum prices have rebounded strongly after the April weakness broke support at $932 per oz. Prices fell to a low of $894, holding just $5 above the December 2016 low at $889.
  • Platinum prices are now holding onto gains better even if they have pulled back slightly from the recent high ground.
  • The stochastics are bearish and prices are back below the 20 DMA so for now the market is consolidating,
  • The monthly chart (inset) shows the downward trend since February dominates but a series of higher highs remains in place going back to early 2016. On balance, it looks as though platinum is content to oscillate sideways in an $890-1,050 range, which suggests a sufficiently supplied market.

Macro drivers

Platinum is seen to be the weaker of the PGMs, with Johnson Matthey forecasting a supply surplus for the first time in six years this year, while palladium’s supply deficit is expected to climb to 792,000 oz. This helps to explain why palladium prices are so bullish while platinum prices have struggled.

ETF investors have been building their exposure. Holdings of 2.49 million oz are now at the highest they have been all year, up from 2.386 million oz on May 4. This suggests bargain hunting is building. With palladium soaring, there may be some buying in platinum by those expecting the gap between the two metals to widen again.

Funds trading on Nymex turned net buyers in the week to May 16. Last week the net fund long position (NLFP) climbed 2,637 contracts to 19,683 contracts. The move was driven by 1,180 contracts of fresh buying and 1,457 contracts of short-covering, which is doubly bullish.

The NFLP has now climbed for four weeks but this is due to a fairly high gross short position at 25,134 contracts; the average since start of the year has been 15,833 contracts. So there may well be more short-covering to be done but we wait to see if the longs get more bullish.

Conclusion
Platinum prices have been weak but, in recent weeks, some bullishness has started to emerge. We wait to see if bargain hunting emerges. At some stage, we expect platinum’s discount to gold to shrink but there is little sign of that happening yet.

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