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Platinum Power

19 February 2021

Of all of the precious metals traded on the futures markets (gold, silver, platinum and palladium), it seems that platinum is in a group by itself as it has consistently risen for the last three consecutive weeks.

We saw Gold slip down this week to its lowest close since June 2020, reaching $1,767.20 or 2279.85 AUD at 4PM AEST.  While it does look like a bearish pattern is forming, Bulls are working to stabilise the market and fundamental factors remain positive. It looks like the recent down trend in Gold might have reached a support level aligning with post COVID-19 price collapse highs of May through June 2020.  If this support level holds, this could act as a launchpad for a potentially big upside price trend.

Silver dropped slightly toward the end of the week to be $26.71 or 34.65 AUD per ounce at 4PM AEST, though has been less affected than gold.
Futures prices also dropped on both metals with Gold down 0.52% to $1,765 (4PM AEST) and silver down 1.05% to 26.795 (4PM AEST).  The CME Delivery report shows that an incredible amount of contracts are already providing notice of a “Delivery Request”. As the delivery date draws nearer, we could see a supply squeeze for Gold and Silver becoming a very real component of price. The next few days of trading in Gold and Silver could become very volatile as global traders realize the demand for deliveries may squeeze prices much higher. Watch this space. 

This week we saw startlingly high Core and non-Core Retail sales in the US, which came in at 5.90 and 5.30 per cent respectively, as consumers flocked to spend their stimulus checks in January. These blockbuster results were way higher than the consensus expectations of around 1.00 per cent, demonstrating unexpected strength from the consumer.  
U.S. labor market continues to lose more momentum as more American workers than expected file for first-time unemployment benefits, and unemployment levels remain high.
Rising government bond yields are a focus of the marketplace this week and that competing asset does have the stock market bulls a bit worried. The U.S. Treasury 10-year note reached its highest yield in a year earlier this week, currently fetching 1.282%. If U.S. Treasury yields continue to rise, investors would be more inclined lock in those higher returns. For perspective, the German 10-year bond (bund) yield stands at -0.359% and the U.K. bond (gilt) yield is 0.585%.
Asian Markets
Mainland China markets were open Thursday after being closed several days for the Lunar New Year holiday.
Some of the strong retail sales data will reflect stimulus cheques landing in the hands of individuals and cycling through into the economy. Fixed income markets sold off through the week, with 10-year nominal yields spiking to 1.33 per cent on Wednesday as asset markets digested the positive economic news. Stocks remained steady, although the SPX (Standard and Poor Index) has had a narrow and indecisive week in the midst of some serious moves in bond markets.

In particular, real yields, adjusted for inflation, rocketed to minus 0.87 per cent, having traded as low as -1.09 on the 10th of February
The spot price of gold fell sharply after the US returned on the 16th after the President’s Day holiday as the Dollar Index rallied hard to peak at 91.05 mid-week and the above-mentioned economic data shook bonds.

The drop in the price of gold takes the price close to the Weekly Ichimoku cloud support at US$1760-61. That is also the December 2020 low, and the initial reaction should be to find support there. Downside targets extend to US$1734-1754. Above the overnight low, a recovery to US$1802 is likely, as far as the overnight low is maintained.
Outflows from Gold ETFs this week were small but steady. Open interest on the CME gold contract has shrunk by around 800,000 Tozs from last Thursday to Wednesday, the latest available data slice, suggesting an overall reduction in long positioning basis the price action.
Platinum has caught a real tailwind since mid-February. The driver here is optimism over economic recovery post-Covid, coupled with a market that is in deficit and looking ahead long term to the possibilities of a ’hydrogen’ economy. Platinum ETFs have risen by around 55,000 Tozs, and Managed Money positioning on NYMEX has grown by about 467,000 Tozs on NYMEX during February.

Platinum hit the US$1,331 target on our long-term Point and Figure targets, making a high this week of US$1,339. That has been followed by short-term weakness in prices, as prices often reverse after a major or long-term target has been reached. Both the fundamental and technical view support a strong platinum price.
Platinum Long Term Targets

Platinum Long Term Targets

Check out our platinum range here:
In Other News.....
Nymex crude oil futures prices are weaker and trading around $60.70 a barrel. Bloomberg today reported, “With millions of Texans in the dark for a fourth day after the unusually cold weather caused widespread blackouts, the fallout for energy markets is becoming a worldwide problem. Almost 40% of U.S. crude production is now offline, helping push the global benchmark Brent price above $65 a barrel in Asia trading. While temperatures are forecast to rise this weekend, it could take weeks for production to be fully restored as operators need to assess wells for damage.”