Weekly Investment Insights Platinum rally to resume?
- Platinum has been one of the leading performers of the precious metal basket year-to-date, rising 13% (as of 9th February 2017).
- Technically, the price has managed to break through some of its key levels but correction potential exists.
- In the longer term, buoyant demand from risk-averse investors and the European automotive industry should keep the metal fundamentally supported
Precious metals have a strong start
Year to date, precious metals are up on average 9.6%* as a weakening US Dollar and safe haven demand have kept the complex aloft. Of particular note is the strong rise in the price of platinum (11.3%*) which currently sits at a four month high and whose differential to gold has fallen to around $200, a recent lower bound. Last year platinum was the laggard of the precious metals basket, rising a meagre 1.1%* while its close relative, palladium, returned a healthy 22%*. The metal has broadly traded in gold’s slip stream and despite five years of market deficit has failed to re-establish price levels of above $1,300 it enjoyed prior to 2014. From a technical standpoint, the current rally appears as though it does have some room to run further and gains could be sustained beyond should investment and European automotive demand remain buoyant in 2017.
Balance in sight?
The world’s largest platinum and palladium refiner, Johnson Matthey, expects the platinum market to show a small surplus in 2017, while the World Platinum Investment Council (WPIC) foresees a deficit. Both forecasts assume weaker demand from global investors and the European automotive industry in the year ahead. However, given the considerable political uncertainties present in Europe and the US, investment demand is likely to remain supported which should be reflected in a continuation of inflows into platinum backed exchange traded funds that witnessed in the fourth quarter of last year. Meanwhile, consumer spending looks increasingly healthy across developed nations as growth prospects improves, boding well for the platinum price in the longer term.
Near term rally could linger
Looking at daily moves, the platinum price has recently broken through both its 200 daily moving average (DMA) of $1,011/oz and its 38.2% ($1,007/oz) Fibonacci retracement from its run lower between August and December last year. Furthermore, the metal has managed to sustain a week above the psychologically important $1,000/oz level. Speculative futures positioning has broken higher above its five year average as longs rebound from December lows and shorts reach the lowest level in approximately two and a half years (Aug-14, see Figure 1). This would all suggest that some correction potential has accumulated but providing the US dollar doesn’t experience a resurgence then the trend could continue higher in the short term (next few months), especially as the price has sustained breaks above key technical levels (as aforementioned).
Investors wishing to express the investment views outlined above may consider using the following ETF Securities ETPs:
ETFS Platinum (PLTM)
ETFS Physical Platinum (PHPT)
ETFS Physical Palladium (PHPD)
ETFS Daily Leveraged Platinum (LPLA)
ETFS Daily Short Platinum (SPLA)
Swiss Franc Daily Hedged Platinum (CPLT)
The complete ETF Securities product list can be found here.
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