From Seeking Alpha " Platinum catches a bid, finally Platinum...

From Seeking Alpha

"
Platinum catches a bid, finally

Platinum fell to its most recent low on July 11 at $891.40 per ounce which was the lowest level since early 2016 when the rare precious metal hit rock bottom at $812.20 per ounce. Last week, as the prices of gold and silver retreated from the $1280 and $17 per ounce levels, respectively, platinum went in the other direction. Source: CQG

The daily chart of NYMEX October platinum futures shows that the metal actually made a higher high over recent days as gold and silver were correcting to the downside and reached $982.80 per ounce, the highest level since late April. While platinum was trading at the $974 level on Tuesday, August 8, it moved above technical resistance and the next price target on the daily chart is at $996, the April 17 highs. $1000 per ounce is a critical psychological level for platinum which reached the highs for 2017 at $1047.80 in late February. Platinum could be on the verge of making a long-overdue move to the upside, which is overdue for the metal that has a nickname as rich-man’s gold.
Three reasons why platinum should rally

Platinum has consistently been the worst performing metal in the precious metals sector since 2014. There are three main reasons why I believe platinum is a dog that is going to have its day shortly.
First, the technical picture for platinum is starting to look a lot better than it has in a very long time. Source: CQG
As the monthly chart shows, the slow stochastic which is a momentum indicator crossed to the upside in July which is a sign that the path of least resistance for the metal is now higher. As the longer-term chart details, each time this metric has crossed higher in or close to oversold territory, a significant rally followed. In 2008, the change in momentum resulted in a rally from $761.80 to $1918.50 three years later. In late 2015, the shift to the upside in momentum took platinum from $812.20 in January 2016 to highs of $1199.50 in August of last year. The first reason to be bullish about the prospects for platinum is that the technical position of the futures market is its best position since January 2016.

The second reason is that platinum remains historically cheap compared to both gold and its closest cousin, palladium. Source: CQG
The quarterly chart of the platinum minus gold spread shows that the differential between the two metals remains close to an all-time low. The range in the spread since 1974 is a $360 discount to a $1150 premium for the price of platinum compared to gold. Platinum, or “rich man’s gold,” has not traded at a premium to gold since 2014 which is a historical anomaly. A reversion to the mean would take the price of platinum back to a premium to gold. While divergence can last for months or years at times, platinum is cheap on a historical basis when compared to the price of gold. Over recent sessions, the spread has recovered slightly from recent lows. When it comes to platinum’s price relationship with palladium, the metal is also at the cheapest level in years. Source: CQG
The quarterly chart of the platinum minus palladium spread shows that the differential between the two metals remains at the lowest level since 2001. The range in the spread since 1982 is a $344 discount to a $1600 premium for the price of platinum compared to palladium. At less than $100 per ounce differential, the value proposition for platinum has improved dramatically when it comes to industrial requirements for the precious metal.
The third and final reason why platinum will eventually rally and the dog will turn into a star in the precious metals sector is that the fundamentals for the metal support a higher price when compared to its precious cousins. Often the worst performing commodity within a sector for a period becomes the best in a subsequent period. The price of platinum has been so depressed for so long that a rebound is long overdue at this time. Platinum is one of the rarest precious metals that trade on the futures exchange. There is only around 250 tons of platinum output each year compared with over 2800 tons of annual gold production. Platinum is a metal that occurs deeper in the crust of the earth. Therefore, the production cost of platinum is higher than for gold. Finally, platinum is denser and has a higher melting and boiling point when compared to both gold and palladium. Therefore, on a per ounce produced basis, platinum has many more industrial applications. It is possible and likely probable that those with an industrial requirement for precious metals will increase purchases of platinum compared to palladium because of its value proposition these days. Increasing demand for platinum will lift the price which could entice investment demand back which has been absent for a long time.

Platinum outperformed its precious cousins last week, and it is possible that we could be on the verge of a long overdue turning point for the metal that has traded like a dog in the sector. The old saying says that a man’s best friend is his dog. Platinum could be a best friend to investors and traders who realize that the downside in the metal is limited, the upside explosive as platinum appears to be turning a corner and the path of least resistance on the long-term chart is now higher for a metal with compelling fundamentals.