Commodities 5 minutes to read

Platinum challenges downtrend from 2011

Ole Hansen

Head of Commodity Strategy

Summary:  Spot platinum has popped higher this morning, thereby challenging the downtrend from 2011, while breaking above previous resistance at $877/oz


That resistance level is now support and the pop higher is happening as relative value traders take a closer a look at the deep discounts to both gold an palladium. We have seen no particular trigger behind the move which is likely to be momentum and spread driven. 

Our breakout model is going long PLN9 on a daily close above $879.9 (with an initial stop at $782.5). However with the disclaimer that the average signal p/l based on our back testing has yielded an average return per signal of -2.2% since 2003.

With gold currently struggling to break higher amid recent dollar and stock market strength traders have instead cast their eye on relative value plays. With silver still stuck in the mud despite trading close to a multi decade low relative to gold, the focus has instead moved to platinum. Not least because of all the attention the Platinum Group Metals have received recently with the tight-fundamental-driven surge in palladium. On that basis a renewed bid in gold, especially if it manages to break back above $1,300 may benefit platinum more than the yellow metal itself.
Source: Saxo Bank

Total holdings in exchange-traded funds backed by platinum has jumped by 28% since the December low to reach a record 92 metric tons. This occurred during a time where the discounts to gold and palladium both reached record highs before contracting.

From a technical perspective the gold-platinum spread, which reached a record $525 on February 14 and which is currently trading $410, could reach $350 before finding the first level of resistance.

Money manager,s meanwhile, in the week to March 26 increased their bullish bets by 8,351 lots to 11,445 lots, a one-year high.
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