Platinum, like the rest of the precious metals, has performed impressively in recent weeks. The early-summer low at $1374.50 hit on June 29 survived multiple tests in July and August, leaving last year’s low at $1339.20 (hit on December 29, 2011) well protected and setting the stage for the current rebound.
BIG GAINS
From the August 3 low at $1376.90 to today’s high at $1655.00, platinum is up 20%. The price acceleration away from the 20/50/100/200-day moving average (MA) complex, along with the 20-day MA crossover of the others, and the seemingly impending 50-day cross of the 100-day MA combine to set a pretty favorable technical tone. While the market is overextended on a short-term basis, corrective retreats would offer buying opportunities.
MANUFACTURING DEMAND
Fundamentally, the market appears strong as well. About 60% of platinum demand comes from the automobile industry and global car sales rose 6% in the first half of 2012.
While the ongoing sovereign debt crisis in Europe and continued sluggish economic growth in the United States and elsewhere are perceived to be headwinds for the auto industry (and by extension platinum), robust demand for cars in emerging markets such as Russia, China and Brazil are seen as an offsetting factor.
The ongoing recovery process in the wake of last year’s earthquake and tsunami also contributed to a 52% year-over-year rise in Japanese auto demand.
U.S. DEMAND IS SOLID
Make no mistake, U.S. auto demand has been solid this year as well, reaching a 5-year high amid pent-up demand, easier credit and cash-flush corporations updating aging fleets. However, doubts about sustainability persist. It remains to be seen if super-accommodative monetary policy on the part of the world’s major central banks can foster a true and broader global recovery. The fact that platinum continues to trade at a discount to gold is reflective of these doubts.
LABOR UNREST
Renewed labor unrest in South Africa — the world’s largest producer of platinum — offers additional support to the market. Fresh protests today shut down some South African operations of Anglo American Platinum, heightening concerns about constrained supply.
EYEING DOUBLE TOP RETEST
Platinum now shows potential for a retest of the double-top from February at $1733.00/$1733.50. However, I’m disinclined at this point — despite my call for new all-time highs in gold — to consider the all-time high in platinum from March 2008 at $2154.50 to be in play. Given the still substantial debt overhang in the developed world, I fear we are in for many more years of sluggish growth, regardless of extraordinary central bank efforts at monetary stimulus.
