Platinum Regains Premium Over Gold

OptionsXpress
updated | Author's Website

Monday, March 19, 2012

For traders looking at the Platinum market outright, prices are beginning to consolidate, with trading volume starting to wane, confirming the sideways activity. With the fundamentals currently positive for Platinum prices, some traders may want to explore buying July Platinum should prices close above resistance at 1709.00.

Fundamentals

The platinum market finally regained its price premium over Gold for the first time in nearly 6 months, as an improving U.S. economy and supply concerns for Platinum have sent traders back into this industrial and precious metal. Unlike Gold, Platinum is mainly used as a store of value or for jewelry. Platinum has many industrial uses, from automotive and medical to even the petroleum industry, as well as for the production of jewelry. So any signs of an improving economic recovery should help support the more industrial of the precious metals, such as Platinum and Palladium. In addition, there are concerns about the potential supply of Platinum entering the market this year, as production from Platinum mines in South Africa, which is the world’s largest Platinum producing nation, have been lower than expected due to labor disputes and safety concerns by miners. Ultimately, the strength in Platinum’s price rebound over Gold may be determined by the actions of momentum based systems traders, who may be drawn into the long Platinum/short Gold trade now that Platinum prices are above parity with Gold prices.

Technical Notes

Looking at the daily chart for April Platinum, we notice the market has moved into a consolidation phase, after rallying nearly $400 per ounce since the start of 2012. The 20 and 200-day moving averages have turned mixed, as trading volume begins to decline, which is adding credence to the current consolidation phase. The 14-day RSI has moved to neutral territory, with a current reading of 52.90. The next major resistance level in April Platinum is seen at the recent high of 1739.00, with support found at the recent low of 1606.00

Mike Zarembski, Senior Commodity Analyst

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