Platinum continues expected strength | 12 Feb 2021
Platinum Price Forecast relative to Long Term Monthly - Medium Term Weekly - Short Term Daily - and Hourly (not shown) data.
(Previous week in brackets)
|PT Trend||↑ (↑)||↑ (↑)||↓ (↑)|
|PT % Risk
|90 (90)||84 (82)||89 (54)|
Total allocation 50% (55%)
12 February 2021 close: Whilst Gold and Silver suffered somewhat at the hands of traders switching from paper metals to crypto (see crypto blog), Platinum continued its expected strength with a highest weekly close in 6 years. Even though we see an hourly risk weight in overbought territory and daily turning down, the long term trend is still in full swing. We predict that the 1500 level will be triggered relatively soon as more people start to discover platinum as one of the more attractive and safe wealth preservation assets. Due to Pt advance in recent weeks relative to the other precious metals Gold and Silver, platinum share of in the overall physical metals allocation increased to 35%. No Change.
5 February 2021 close: We expect Platinum to broadly stay ahead of the Gold curve. Primary reason for Platinum to maintain momentum towards a 1:1 ratio with gold, is its exclusiveness in a much thinner market. Critical is to only buy physical. The easiest place to do that for Europeans is by opening an account at the banking licensed Bitpanda crypto exchange. US and Canadian citizens can best use any of the dual custodian encumbered options offering precious metals backed by physical. As we enter 2021 with a massive increase in so many crypto values and Central Banks obliged to continue funding economic shortfalls it probably will not be long before the physical precious metals market is forced to disconnect from the paper market where the 'shorts' reside. Owning physical is absolutely critical. Last week we saw Platinum only shaving a few dollars whilst gold lost $100 and on the brief $30 (+1.7%) Gold rebound close at the end of the week Platinum rallied to close up $45 (+4.1%) from its low. Platinum falls in the category of 'must have exposure' to preserve wealth. Our Platinum long position was entered at an average of just under $900 last year when the Gold/PT ratio was at 2.15. No Change.
GOLD/PLATINUM Ratio Price Risk Charts & Analysis
(Previous week in brackets)
|Gold Platinum ratio||Monthly||Weekly||Daily|
|Trend||↓ (↓)||↓ (↓)||↑ (↓)|
|9 (16)||3 (5)||6 (2)|
Total allocation 50% (55%)
Gold/Platinum Ratio Charts
The Daily Gold/Platinum ratio risk weight dropped sharply again into a potential oversold condition as a result of the strong increase of the platinum price last week. This ratio market is not attractive to trade short term due to relatively high conversion margins in the physical market space. A temporary reversal may materialize, but we shall not attempt to maker changes to the present metals allocation until Long term Gold/Platinum risk weight indicators become clearer as to a more pertinent change of trend.
Weekly Gold/Platinum ratio risk weight is in an oversold range, but the downtrend has been substantial enough to expect further weakness over a longer timescale. Yes we may see a weekly bullish divergence reversal and one that may quickly fail a more common risk weight analysis. Strongly trending markets like Platinum are known to extend often beyond target dates and prices. Platinum is also known to extend beyond the 1:1, hence better risk to hold Pt even if Gold starts to outperform Platinum for a few weeks or months.
Looking at the Gold/Platinum monthly chart we notice a strong price trend south and equivalent risk weight closing in on oversold. The chart also shows how past monthly risk weight levels, up or down, often took one year or more before the primary trend tops or bottoms out. We should expect the same. It is a strong trend and we have a substantial cushion to allow for any medium term reversal and a major extension towards and beyond the 1:1 ratio. At the present level of Gold, platinum has another $600 dollars to go and we expect to see that happening sooner rather than later due to a much more limited market liquidity in physical platinum.
Interim Quarterly risk weight closed the week of 8-12 Febr at 28 versus 37 last week. This rapidly dimishing risk weight is pretty common after a market has lost 35% of its value from the March 2020 peak. The current ratio at 1.46 is still well above the average ratio price based on a quarterly close for the past 50 years. That average 200 quarter Gold/Platinum ratio is 0.88. We have also seen Pt trade at a ratio of 0.5 on extension just like the totally unreal pump to 2.26 last March. 0.5 ratio means Platinum would need to gain another $2,400 relative to gold. It has happened before.
The Gold Platinum ratio quickly proved the bearish divergence position as it rose above 1.70 the week before with risk weight over 70. The ratio dropped hard into oversold on Friday. The current trend is likely to develop a lot more fluctuation in the shorter term Gold/PT ratio time scales and especially if gold starts to finally make that fundamental correction into an unavoidable global currency reset. Silver and Platinum are likely to stay ahead of that upward curve as they will suffer from liquidity in a market with unprecedented demand. Right now it is all crypto, but the precious metals days will come to rebalance the entire currency space. Owning either metal with exception of Palladium, which already run its course, is NOT speculation.
The Weekly timescale also turned further down to close at a risk weight of just 5. Once markets are seriously underway as the Gold/Platinum ratio has, Risk weight is entirely controlled by the Long term time scales. Several weeks of price consolidation with closes in the upper end of the weekly range will be typical driving bearish divergence until our 1:1 target or even much lower has been realized.
The 6% Gold Platinum drop at the 5 Febr close pushed Monthly risk weight to just 16. The Monthly interim risk is now supported by a Quarterly interim risk still strongly down. If the ratio turns lower during February and finishes relatively high we can expect the downtrend of Gold vs Platinum to continue for longer still as relative risk weight will then create room for further drops.