Platinum for July delivery closed Monday down $14 (less than 1%). The metal looked to be down and out just a few weeks ago but it was able to sustain its rebound and reach a new recovery high. We attribute that to the weak US Dollar and the very strong moves in Gold (NYSE:GLD) and Silver (NYSE:SLV). Strength in the pure precious metals filtered down to Platinum, which is more of an industrial metal. How else can we explain the move in Platinum when Copper and other base metals failed to make new highs.
The outlook for Platinum is somewhat mixed as an array of factors are pointing in different directions. Sentimentrader.com shows only 18% as bulls on the US Dollar. That is a multi-year low and comes as the US Dollar is set to test its 2008 low. A dollar rally would certainly be negative for Platinum and all Commodities. Meanwhile, happenings in Japan, who is very important to the auto industry, can have an impact either way. Auto production is expected to be low for a while. However, if that slack is picked up elsewhere then demand for Platinum would rebound. Also, we should not forget macroeconomic factors which have been driving markets for several years. The end of QE II and perhaps the start of slightly less accommodative policy could trigger a shift in the markets. Finally, Oil (NYSE:USO) is a major factor in all commerce. If Oil declines back below $100 then that will give most markets a boost. However, if Oil continues to make new highs then the auto sector (and Platinum) would be affected. Of course you need to keep your eye on South Africa as any sudden problems there be-it political, strikes, etc, would be immediately priced into the market. Most platinum production comes from South Africa.
Turning to the chart we see that Platinum managed to close last week at a new recovery high. However, the market gave back some on Monday. The market has strong support at $1790-$1800 and resistance at $1875 and $1900. The market needs some follow-through after last weeks breakout.
Jordan Roy-Byrne, CMT
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