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Platinum Price (XPT) Poised for Dip below $1313

By Research, Research Team
07 February 2014 17:50 GMT

Main Points:

• Shooting star signals considerable downside risk

• Bias is bearish due to Lower High (LH)

• Price may get support due to ongoing strike in South Africa

The Platinum price closed on Wednesday around $1378 per ounce with a shooting star candle at daily chart, which shows considerable downside risk, however two critical support levels might halt steep fall in price. Platinum prices are being traded near $1380 at 10:30 GMT in London with immediate support seen around $1372, which is the 61.8% fib level, ahead of $1350 i.e. the 76.4% fib level and last major support ahead of the previous wave’s swing low. A daily close below $1350 may threaten $1313, the low of December 20th and a very major support level for Platinum.

Platinum_Price_Poised_for_Dip_below_1313__body_platinumxptusddailychart.png, Platinum Price (XPT) Poised for Dip below $1313

On upside, resistance can be seen around $1386-$1391 zone where both the 50% fib level and the 55 Daily Moving Average (DMA) are currently sitting in. A break and close above that resistance may expose $1400-$1409 i.e. the psychological level, the 100 DMA as well as the 38% fib level. Above the $1400 handle, another significant hurdle is noted near $1428-$1432, which is a confluence of the 200 DMA and the 23.6% fib level.

As you can see in above chart that Platinum printed a Lower High (LH) in the previous wave, which had turned our bias into bearish; now we expect a Lower Low (LL) below $1313 that will be a confirmation of a downtrend. This technical scenario also matches with the macro-economic picture.

The services sector in the US grew better than expectations during the month of January, a report by a private firm revealed yesterday. However, private employers could create just 175,000 new jobs last month, the smallest one-month gain since August of last year. Developments about the US economy affect the value of USD which is negatively correlated to the price of Platinum and other commodities.

Platinum also missed buying support from China this week, where the holiday season is ongoing. Moreover, China, the biggest consumer of Platinum, grew last year at the slowest pace since 1999 for the second consecutive year. Manufacturing activity also slowed down in China during January, according to a report by HSBC Holdings. These developments about the world’s second largest economy kept Platinum under selling pressure last week.

Meanwhile, around 70,000 workers are on strike at the three main Platinum mines of South Africa. These mines include Impala Platinum, Anglo American Platinum, and Lonmin. According to an estimate, South Africa's Platinum industry is suffering a whopping 154 million rand (ZAR) loss every day due to this strike. The supply concerns, amid ongoing strike in South Africa, may provide support to the price of Platinum in the short term.

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07 February 2014 17:50 GMT