Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Platinum Outperform Gold?

Commodities / Platinum Jan 18, 2013 - 03:03 PM GMT

By: P_Radomski_CFA

Commodities

Platinum and gold have been playing a game of tag, and this week, platinum took the lead again regaining its rightful position up front, but for how long?

Looking back at history, platinum has been the front runner with an average $200 to $400 premium to gold. At times the difference was much greater. Before the 2008 Lehman Brothers crash, platinum was trading at more than $2,270 per ounce while gold was trading under $990 an ounce. The prices as of close of this week's issue were $1,686.50 for gold and $1,694.30 for platinum.


As the bull market in the precious metals sector continued, the yellow metal's spectacular marathon over the past few years began posing a challenge to platinum. On September 2, 2011 gold took the lead pumped up on a runner's high. This past year (2012) it looked like gold had hit the wall of fatigue and needed to catch its breath. And this week, for the first time since March, platinum captured its rightful place as leader of the pack.

Platinum rallied strongly in the first two weeks of 2013 on bullish fundamental reasons, but the true catalyst for this week's move up came on news of supply disruptions from Anglo American Platinum Ltd. (AMS.JO), the world's largest platinum producer which announced that it will suspend production at several mines in South Africa. Closing the mines will cut platinum production by 400,000 ounces annually, according to some news reports. The company produces about 40% of the world's mined platinum. The troubles for platinum don't stop there. The cutbacks will result in 14,000 job losses, or 3% of the country's mineworkers, and a 20% drop in annual production. Union leaders are already threatening new strikes, which brings to mind the violent strikes of last summer which resulted in about 50 deaths. On Thursday miners returned to work after an illegal walkout, but it's difficult to predict how this will play out.

There are several fundamental factors influencing the platinum market. Analysts say that global platinum production as a whole is in a deficit; with some citing a supply deficit of 400,000 ounces in 2012, versus a 430,000 ounce surplus in 2011. This news comes in tandem with a forecast of a rebound in automotive sales. Platinum's greatest industrial use is in auto catalysts, so the simple equation of tight supplies and higher demand underpins a strong fundamental outlook.

Platinum prices began to fall around a year ago in when demand dropped due to the poor economy. Then in August prices picked up again due to the labor strikes in South Africa, which produces 75% of world platinum supply. As the labor disputes were resolved, prices drifted lower once more, until recently.

Platinum is much more rare in nature than gold. Approximately 10 tons of ore must be mined - sometimes almost a mile underground at high temperatures- to produce one pure ounce of platinum. More than ten times more gold is mined each year than platinum. In fact, all the platinum ever mined throughout history would fill a room of less than 25 cubic feet. Unlike gold, which is either held in bank vaults or used in jewelry, more than 50% of the yearly production of platinum is consumed (used up) by industrial uses, mostly in the automobile industry so that are no large inventories of above-ground platinum.

Having discussed platinum's fundamentals, let's see what charts tell us about its near future. We'll begin today's technical part with its direct "competitor" - the yellow metal (charts courtesy by http://stockcharts.com.)

In gold's very long-term chart, where the daily noise is nicely filtered out, we see that gold formed a bottom slightly below the 300-day moving average. This is similar to what was seen in 2009 and also 2007, when gold bottomed close to this support line. It seems that another powerful rally for gold prices could be in the cards. All-in-all this chart and the long-term trends are clearly bullish for the yellow metal for the coming month.

Now let us move on to a chart that shows platinum's long-term performance relative to gold.

In the platinum to gold ratio chart, recent trading days have seen a post breakout rally triggered by supply issues in South Africa. Fundamental factors and news, however, don't determine how much prices will rally in the short-term or if the rally should be followed by a correction or a big move to the upside, which seems to be the case today - technicals do.

An important technical development is the breakout above the declining long-term resistance line. This is something we have emphasized previously and will still have bullish implications next month since the price of platinum is still well below the long-term average relative to gold. It seems that platinum is undervalued and we feel it will outperform gold in the months ahead.

Summing up, the long-term outlook for gold remains positive. Long-term analysis shows patterns which are similar to those seen right after major bottoms (and one was just in). This has bullish implications. The platinum market seems poised to outperform gold in the coming months. With the yellow metal's outlook being bullish for the medium term, this makes platinum likely to rally strongly in the future. It still does not seem too late to take advantage of this.

Thank you for reading. Have a great and profitable week!

Would you like to read the full version of today's analysis? Sign up for a free trial on our gold & silver investment website SunshineProfits.com.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold & Silver Investment & Trading Website - SunshineProfits.com

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in