A Platinum Record
Platinum – April futures are up another eye-popping 54 dollars in early trading on worries that supplies will remain tight. South African utility company Eskom will limit electricity use to 90 percent for mines through 2012, setting up a potentially significant supply squeeze considering world stocks are already at historically low levels. Palladium futures may also get a lift from the news, as industrial users of Platinum may begin substituting due to the rocketing costs. The problem for the industrial consumers is that Russian exports of Palladium are inconsistent, forcing them to weigh the low cost benefit versus normally reliable supply from South Africa. Today’s release of the import and export price data suggests higher inflation, bolstering demand for precious metals as an inflation hedge. The Empire State Index showed a decline of 11.7 percent versus expectations of a 7 percent increase, which has sent equity futures tumbling and may lead to more inflows of funds into commodities. Technically, there is very little to say about the April Platinum chart. We continue to make new highs daily and, because the market is at historically high levels, it is difficult to gauge where resistance may come in. The RSI is extremely overbought at 90 percent, but is being outpaced by the momentum indicator, suggesting the trend is not weakening.
Copper – Copper futures did an about-face this morning, rallying almost 8 cents. Chinese imports of the yellow metal rose to 239,000 tons in January from 224,553 tons in December. LME warehouse stocks have been dwindling, but much of this inventory seems to have shifted to Shanghai, which showed a rise of 10,493 metric tons for the week. The weak Empire State Index reading was more than offset by the inflationary import and export prices. Base metal traders have largely taken their focus off of the U.S. economy – economic data is weak and the housing market is about as bad as it can get, so expectations are not very high. Rising aluminum prices due to the South African power situation have also offered outside market support for Copper. The March Copper chart continues to form a bull flag consolidation pattern, suggesting prices may test contract highs of 3.75. The market initially rejected 3.60, which sparked some technical selling, but did not do any major chart damage. 3.55 was the measured move objective for the inverted head and shoulders bottom, and 3.60 was previously the trigger line for the double top pattern in last October and a relative high made on October 29th, which is why this area has offered stout resistance. A solid close above the 3.60 mark may bring more buyers into the market and squeeze out shorts. Momentum continues to outpace the RSI indicator, suggesting a bullish near-term bias. Support comes in at 3.4350, 3.3825 and 3.3085, while resistance can be found at 3.5615, 3.6355 and 3.6880.
Coffee – The Coffee market has been a runaway train of late, breaking out of an extended slumber on supply concerns. The market opinion is that the upcoming crop year will be much less productive for growers, who will struggle to meet rising demand. Soft commodities have underperformed versus other commodity markets such as metals, grains and energies, leading many traders to believe that the sector has the greatest growth potential, especially with legitimate supply concerns in Cocoa and Coffee. After finally breaking through resistance at 146.25, it has been a straight rise in the May contract. The 9-day RSI is giving an extremely overbought reading of 90 percent, which could open the door for some profit-taking. Momentum continues to outpace the RSI, suggesting the trend has not weakened. Support comes in at 151.00, 146.25 and 142.00, while resistance may be found at 160.00 and 165.00.
Rob Kurzatkowski, Commodity Analyst
