Platinum price pause is welcome | 11 Dec 2020
Platinum Price Forecast relative to Long Term Monthly (LT-M) - Medium Term Weekly (MT-W) - Short Term Daily (ST-D) - and Hourly (not shown) data.
(Previous week in brackets)
|PT Trend||↑ (↑)||↑ (↑)||↓ (↓)|
|Pt % Risk
|76 (76)||80 (74)||61 (92)|
Total allocation 55% (50%)
11 December close:: Platinum strong performance the last 4 weeks has taken a breather which could be expected given the dive in the Gold/Platinum ratio from 2.20 to 1.75. That pause is welcome as it sets up for allowing a short to medium term divergence to develop. As we yet need to see a technical price top and with Gold itself still looking firm, such top is likely to be many months away.
Strong hold. No Change.
4 December close:: Platinum vs USDollar had one of its better weeks in history rallying a full 12% during the week and finishing 10% higher against dollar making up 7% versus gold. Platinum also closed above our 1037 target which is significant and opening a new short term interim target of 1155 and a medium term target range of 1400-1600. Risk weight is still trending very positive in the Medium term Weekly and Longh term monthly time frames. Daily is getting overbought, which is normal after this strong 4 week performance and any short term reaction typically leads to bullish divergence between short and long term. Confidence that our opportunity trade in Platinum is indeed a quality risk. No change.
GOLD/PLATINUM Ratio Price Risk Analysis
(Previous week in brackets)
4 December:: Check our freshly updated charts below.
|Gold Platinum ratio||LT-M||MT-W||ST-D|
|Trend||↓ (↓)||↓ (↓)||↑ (↑)|
|39 (34)||10 (0)||43 (0)|
Total allocation 55% (50%)
Gold / Platinum Ratio Charts
Daily Ratio as at 11/12/20
This week we got that expected pause after a first recovery phase of Platinum versus Gold. And with a relatively small 3% retracement, Daily risk jumped from 0 to 43.
We may expect a bit more pressure on Platinum, but at the same time, once a movement starts it will be hard to trade if the market decides to follow through. If the physical position is large enough to match at least one Platinum futures contract, trading may be possible and somewhat beneficial. We prefer however no leverage in our risk approach. This reduces opportunity of course and massively reduces risk of loss.
Weekly Ratio as at 11/12/20
Weekly also bottomed last week at 0 and rose some 10 risk weight points. It may or may not continue to correct and if it does, the Daily is likely to shoot up further and develop that bearish divergence,d setting up for the next move towards a 1.50 ratio.
Monthly Ratio as at 11/12/20
Monthly risk is updated weekly and is therefore an interim risk level. End of month risk levels are critical to better understanding a turn in the risk weight trend. (Note that this month end price condition is a personal preference in how to read charts and technical tools and allow better comparison against higher and lower time scales). This weeks correcton caused the interim Monthly risk weight to rise a little from 34 to 39 and maintaining a strong downtrend in the process. We have added the risk weight price points only for information.
Qrtly Ratio as at 11/12/20
Interim Quarterly risk weight is now at 53, up from an interim level of 49 last week. As with the Monthly comment this level emphasizes the strong downtrend of this ratio according to the quarterly trend and should at some future date reach its equilibrium with Gold of around 1.00. Risk weight only price points shown for information
4 December comment:
Daily Ratio as at 4/12/20
As both Daily and Weekly risk weight are in max oversold range, the Gold Platinum ratio which has dropped over 20% in 5 weeks is likely to either pause or retrace during the coming week in oder to build for another drop towards 1.50. November 1st started at Gold = 2.21 x Platinum. Dec 4 closed at 1.7412. The move is fully in line with our forecast tht Platinum is on its way to equilibrium which is close to 1:1 Gold. The size of the recent downward move in a short period and after strong technical evidence is such that it allows for a patient hold during a likely correction period. History learns that a correction is likely to develop bearish divergence whilst Monthly and Quarterly risk weight are the hard drivers of this long term correction.
Arguably, more speculative type investors could make a temporary switch into Gold or Silver for maybe 50%b of the Pt holding, but only if is weighs against cost of trading. For long term investors and wealth preservationists who are mainly in hard asset physical precious metals this is not a good option yet. No Change otherwise.
Weekly Ratio as at 4/12/20
Weekly now reached rock bottom risk weight after another 5% drop in the Gold Platinum ratio. A pause or correction is likely to set up this market for another strong move in favour of Platinum and a first bullish divergence in the weekly time frame. Markets that move strongly in one direction are known to continue in overdrive until it stops. Only very short term technical tools, like hourly and 10 minute time frames can be used to play these final moves. Same applies to the stock market where long ter indicators have continued to show warnings whilst short term indicators keep signalling mild divergences follwing which these markets continued their uptrends. This is a high(er) risk play and against our style of maximising opportunity. Yes, risk is very low but the Platinum market is less liquid and one needs to be very careful bottom picking. Hence staying with the ratio longer term in favor of Platinum.
Monthly Ratio as at 4/12/20
Monthly risk has now dropped to 34 but still strongly down. The rapid move down started at just 70 after massive bearish divergence largely favoring an investment in Platinum some three months ago. Our current balance Precious metals diversification favors the hold on Platinum to rally towards the price of Gold.
Qrtly Ratio as at 4/12/20
Quarterly risk weight is strongly down with some way to go. This quarterly tool indicates that this major turn and shift we have been waiting for should drive the Gold Platinum ratio back to a more familiar 1 to 1 equilibrium, not being suprised if it overtakes gold by a serious margin in due course. Our recent increase into less liquid physical Platinum precious metal allocation should be the lower risk investment.