Why Did Platinum Prices Fall From $1100 Mark?

Platinum Prices has taken a steep fall with NYMEX Platinum Futures prices moving continuously in a downtrend direction from the previous year’s high of $1033.30 (which marked the day’s high on 25th January 2018), to currently hovering around $839.70.

The sharp decline in platinum prices is observed amid rise in the trend of electric vehicles, which supported the other base metals prices and exerted the pressure on Platinum prices, as it is used in diesel cells for curbing the pollution level.

The rising global indices, which marked an increase in the rate of return from other asset classes also exerted pressure on the platinum prices, as in the case of high rate of return from different asset class, precious metals losses their charm as a non-interest-bearing-assets.

In the recent events, platinum prices again rose from the bottom level of $780.90 (which marked the day’s low on 14th February 2019) to the level of $879.80 (which marked a day’s high on 28th February 2019) amid higher Chinese demand for hydrogen-powered cells.

 The Chinese transportation industry is increasing exposure towards the hydrogen-powered cells, as these cells help the transportation vehicle to cover a long-range distance as compared to the electric vehicles.

The increasing demand for hydrogen-powered cells supported the platinum prices; However, the prices again took a correction till $837.20 (which marked a day’s low on 4th March 2019) amid higher dollar prices.

Dollar index (DXY) has surged from the level of 95.82 (which marked a day’s low on 28th February 2019) on the account of improving relation between U.S and China.

The ongoing trade talks between the two major economies has increased optimism among the global investors and supported the dollar prices, which in turn, exerted pressure on precious metals including platinum.

The U.S-10-year bond yield surged from the level of 2.2628% (which marked a day’s low on 27th February 2019) to mark a top of 2.770% on 3rd March 2019.

The rise in Yield-to-Maturity or Market discount rate further increased the expected rate of return of global investors from the different asset class and in turn exerted pressure on platinum prices.

On the demand side, as per the World Platinum Investment Council (WPIC), the global demand of platinum is forecasted to increase by over 2% in 2019 as compared to 2018. The WPIC also forecasted that the global market would mark a surplus of 455Koz in 2019, which will be 10% lower as compared to the market surplus of 2018.

However, seeing the attractive discount on platinum prices over the gold prices, the demand from investors is likely to support the platinum prices. The platinum discount to gold is almost at a level of $500 per ounces, which marks the highest ever discount level on the platinum.

Technical Outlook:

Source: Thomson Reuters: Platinum Futures Daily Chart

Following the developments on daily charts:

The Prices are hovering between 7 and 20 days Exponential Moving Average (EMA), with the commodity currently trading below 200-EMA which is valued at 841. The prices corrected approx. 50% of the initial rally, which is initiating an attractive entry opportunity, the RSI (14) days is currently above the average of 50.

On balance Volume is making a broadening highway trendline, which indicates the presence of bulls in the market.


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