Platinum market behavior is very positive | 26 March 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
|83 (84)||61 (60)||45 (74)|
Total allocation 50% (55%)
26 March 2021 close: Weak price action into Thursday and a fairly strong finish on Friday is such a different picture from what we have seen the past few years. What we've analysed last year is slowly becoming reality. Platinum clearly is still very much undervalued and we have no doubt that the current picture indeed tells a much happier story. Our current target is the 2013 consolidation range between $1400 and 1500. The cushion, coming from an 830 to 920 entry last year gives enough cushion to sit through some volatility whilst risk weight also still favors the long side. No Change.
19 March 2021 close: No matter what happens to Platinum short term, The long term Monthly risk weight trend is showing a leading uptrend which has not yet shown a major top with subsequent bearish divergence pattern. Such pattern is to be expected historically and provides comfort to be very patient with the position even though short term Monthly is now showing a downtrend from a median high level risk percentage of 85%. It may be several years before we reach the next primary peak. After severe and prolonged weakness during the past 10 years any volatile price correction would be opportunity to build a slightly larger position. Platinum of course has similar properties as Palladium which has again made serious headlines as prices rallied strongly during last week. Palladium is a high demand commodity and more difficult and expensive to trade as a physical precious metal. Hence no interest as a medium term investment. We expect Palladium's days to be numbered once China also looks to reduce carbon emission by replacing fossil fuels in cars with batteries. The China market is still growing and keeping demand for Palladium high for now.
GOLD/PLATINUM Ratio Price Risk Charts & Analysis
(Previous week in brackets)
|Gold Platinum ratio||Monthly||Weekly||Daily|
|Trend||↓ (↓)||↑ (↓)||↓ (↑)|
|12 (9)||19 (17)||71 (32)|
Total allocation 50% (55%)
Gold/Platinum Ratio Charts
It took from from March to November 2020 to create that top formation around a Gold/Platinum ratio of 2.10.
The subsequent correction which is in full play has taken the ratio from 2.20 to 1.40 and is taking a bit of a breather right now. Daily risk weight shot up with relatively little price change which is typical for any market in the middle of a primary trend. We expect this primary downtrend to dominate the Gold/Platinum ratio for many more months with several smaller and larger corrections along the way.
Weekly risk weight got oversold and showed minor bullish divergence a few weeks ago. This picture should not be seen in isolation, but it can develop a stronger correction, say towards 1.60 with Risk weight also sharply moving up. Both the very long term and short term indicators will give direction as to when we are beginning to reach a major bottom. Somewhere later this year probably.
A low risk weight is important to consider before a trend change but hardly ever signals a bottom and so many different timescales interact. From hourly to quarterly. The Monthly trend is down and most likely to produce bullish (higher) risk to (lower) price divergence before it converges with shorter term timescales into a real bottom. This looks many months away and we should maintain an initial objective closer to 1.10 now, before zooming in on long term Gold/Platinum ratio equilibrium at 0.88. I.e Platinum more expensive than Gold. Patience.
5 more days till the end of Q1, 2021. Looking at the 50 year chart above it is immediately clear that the average ratio value is somewhere around that 1 to 1 level. The quarterly downtrend is strong which either means we can close the historic 30-40% price gap very quickly or slowly. Hard to predict as short term timescales can change direction at a moments notice or without warning. We believe that this quarterly chart gives strong guidance that the end of this primary trend is not yet in sight.
As argued last week, Platinum may need a bit of space to build for the next move towards equilibrium
Weekly risk weight also indicates a potential pause from the strong correction initiated in March 2020 and into March 2021 from 2.40 to 1.40. That correction will eventually bring Platinum back to where it belongs historically. Around 1.00. Platinum also has commodity use properties similar to Palladium which should help to complete this long term correction.
Monthly risk weight is deep but not finished. A low risk percentage, as seen in previous decades, is not a recipe for a major price correction. We must give benefit of doubt to a longer correction based on this technical picture until we actually see that price correction materializing. Besides, we should expect bullish risk to price divergence before a primary trend changes direction.
Quarterly risk weight continues its downtrend and can be considered a leading indicator which drags shorter time frames in its wave. Of course one cannot trade based on long term indicators as they are primarily used to develop patience and stay committed to that long term trend.