Platinum’s Predicament!
Platinum traders have been on a wild ride of late, with prices hitting a 2-month high on July 20th at $1349.80, followed by a steep price decline the following week. That drop culminated in a more than $40 decline on July 27th, when Nissan Motor Company announced its new technology for catalytic converters that will use half the amount of Platinum, Palladium, and Rhodium currently necessary. This breakthrough could sharply curtail demand for Platinum, especially if other automakers are able to adopt the technology. Meanwhile, workers at Impala Platinum Holdings Ltd. of South Africa have averted a strike, accepting the company’s latest offer for higher wages. Since Impala is the second largest producer of Platinum in the world, the end of the strike threat is also deemed bearish for Platinum. The most recent Commitment of Traders report shows both large and small speculators holding net-long positions in platinum currently totaling over 14,000 ounces. However, the report only covers the period through July 24th, three days before the $40-plus price drop. Traders will be carefully watching tomorrow’s COT report to see how many of these long positions were liquidated in the recent sell-off to gauge the extent of possible further speculative selling should recent support fail.
Looking at the daily chart for October Platinum, we notice how quickly the nearly 3-week rally that started in late June was wiped out once the Nissan news came out. Though the market has recovered somewhat from the recent lows at $1,271, prices still remain below several key moving averages, especially the 100-day MA. The 14-day RSI remains weak, with a reading of 37.62. Bulls would need to see a weekly close above the 100-day moving average currently at $1300.30 to regain control of the market. Bears will be looking for a weekly close below the lows of $1271.00 to keep the momentum in their favor. In early trade, October Platinum is trading at $1296.00, up $5.10.
