Platinum Prices Turn Bearish Closing Near January Lows

Platinum for April delivery is down $37/lb to $1864/lb. After breaking past resistance at $1,780, the market was unable to reach its breakout target. Instead, the market failed at $1,860. Today’s close will be the lowest close since early January.

Most risk markets or assets have failed to make new highs in recent weeks. Also, the US Dollar index has put in a strong bottom at 76 and appears to be stable for the time being. We must also consider that strength in the price of Oil (NYSE:USO) has coincided or been a cause of almost every post-war recession. While Oil (NYSE:USO) went to $150 several years ago, the economy was already in recession after Oil crossed $90. Needless to say, the current price of $100 should have an impact on demand for metals like Platinum.

Despite the short-term downdraft, some analysts remain optimistic. Edel Tully of UBS notes several factors contributing to supply issues. These factors include a stronger rand, rising mine inflation and work stoppages at mines in South Africa due to electrical power issues, strikes and safety concerns. UBS (NYSE:UBS) forecasts an average platinum value of $1,905 per ounce for the rest of 2011 and $1,950 for 2012.

Technically, however, the market is decidedly bearish in the near-term. Platinum has broken below $1,780 and if we apply simple analysis, we get a potential downside target of $1,700. The longer-term moving averages are rising and coalescing near $1,650. Those with an optimistic viewpoint may want to let the market settle and find support.


Jordan Roy-Byrne, CMT
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