Morning Futures Roundup

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The "Forgotten" Precious Metal


   Fundamentals

The public's and media's fascination with Gold, and to a lesser extent Silver, seems to have reached a fever pitch, with Gold's run to all-time record highs finally being met with a much needed correction as we write. However, one of the members of the precious metals group -- namely Platinum -- seems to have been lost in the frenzy.

Platinum prices briefly fell below the price of Gold recently, an event last seen during the height of the US banking crisis. Platinum seems to be plagued by its relative scarcity compared to Gold, which makes it more impractical to obtain large supplies for investment purposes, and also for its main usage as an industrial metal (particularly in the automotive sector for catalytic convertors).

It was concerns that the economic recovery was beginning to stall that kept Platinum prices from moving as swiftly as those of Gold. Fundamentally, Platinum supplies have lagged behind demand, with the market in a deficit 7 of the last 10 years, and it would have been deficit all ten years if not for the increasing amounts of Platinum being recycled and put back into the market.

In addition, there are numerous concerns about supplies out of South Africa, which is by far the largest producer of Platinum, with potential labor problems at the major mines in the country combined with "talk" about potential nationalization of the country's mining industry. Though this is not expected to occur in the near future, it does put a wild card in place for longer-term supply issues.

So here we have a commodity that is in relatively scarce supply with an industrial use trading near the price of Gold, which is in greater supply and lacks the strong industrial demand. So for those with a longer-term perspective, Platinum really does appear to be historically "cheap" when compared to Gold.



   Technical Notes

Looking at the daily chart for October Platinum, we notice Platinum prices have fallen sharply during the past couple of sessions, following to a lesser extent the collapse in Gold prices, which had declined over $200 per ounce since making new all-time highs. Prices have rebounded off the session lows, closing above the 20-day moving average.

The 14-day RSI went from overbought readings above 75 to a more neutral 52.6 reading in just 3 sessions. Trading volume has been moderate during the past several trading sessions, despite the steep sell-off. The 200-day moving average, currently near the 1776.00 area, looks to be support for October Platinum. Resistance is found near 1850.00.


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