News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Mixed
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • Take a closer look visually at the most influential global importers and exporters here: https://t.co/G58J1dg6y3 https://t.co/OiRiBVeuzL
  • Crude Oil Prices Aiming Higher on OPEC Surprise, Inflation Expectations - https://www.dailyfx.com/forex/fundamental/forecast/weekly/title/2021/03/06/Crude-Oil-Prices-Aiming-Higher-on-OPEC-Surprise-Inflation-Expectations.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Moss&utm_campaign=twr $CL #Crudeoil #OOTT #OPEC https://t.co/AKvXWX9DLQ
  • Given the size of the rally in the eleven months preceding the beginning of the current decline a broader sell-off looks warranted. Get your market update from @PaulRobinsonFX here: https://t.co/UxZiSulpwB https://t.co/raXvlzkGbV
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/lp0tmKS9WR
  • Trading bias allows traders to make informative decisions when dealing in the market. This relates to both novice and experienced traders alike. Start learning how you may be able to make more informed decisions here: https://t.co/rz7fqhRoMG https://t.co/3bOSIBeID9
  • Rising yields and US Dollar creates a weak environment for gold, which trades at a 9-month low. Get your market update from @JMcQueenFX here: https://t.co/lh6Qb2qxin https://t.co/MRAYe57e1A
  • RT @FxWestwater: US Dollar Fundamental Forecast: US Dollar Eyes Inflation Data After NFP Boost Link: https://www.dailyfx.com/forex/fundamental/forecast/weekly/usd/2021/03/06/US-Dollar-Fundamental-Forecast-US-Dollar-Eyes-Inflation-Data-after-NFP-Boost.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Westwater&utm_campaign=twr $DXY https://…
  • Forex liquidity makes it easy for traders to sell and buy currencies without delay, and also creates tight spreads for favorable quotes. Low costs and large scope to various markets make it the most frequently traded market in the world. Learn more here: https://t.co/arxYmtQeUn https://t.co/NvEAeWkBP1
  • The British Pound continues to face downside pressure as corrective trades continue. Get your market update from @HathornSabin here: https://t.co/YCctQSt2vB https://t.co/naVcnmf9UT
  • Forex quotes reflect the price of different currencies at any point in time. Since a trader’s profit or loss is determined by movements in price, it is essential to develop a sound understanding of how to read currency pairs. Learn how to read quotes here: https://t.co/CNtqrKWDBY https://t.co/vABKiG4WNe
Gold, Platinum Forecast: Will Supply Shortfall Drive Wider Price Divergence?

Gold, Platinum Forecast: Will Supply Shortfall Drive Wider Price Divergence?

Margaret Yang, CFA, Strategist

GOLD, PLATINUM PRICE OUTLOOK:

  • Gold and platinum prices diverged significantly since November 2020, and the gap is widening
  • Supply shortfall and a projected recovery in auto sales boosted platinum prices
  • Gold prices traded lower within a “descending channel” as Treasury yields climbed
Gold Forecast
Gold Forecast
Recommended by Margaret Yang, CFA
Get Your Free Gold Forecast
Get My Guide

Platinum prices advanced nearly 2% on Monday to hit fresh six-year highs, whereas gold prices traded flat within a bearish-biased trend. Platinum has largely outperformed gold since November 2020, as reflation hopes and a projected recovery in global auto sales brightened the demand outlook for the white metal. Platinum gained over 67% since May 2020, while gold prices rose only 6% during the same period.

Platinum, alongside palladium and rhodium, are used by the auto industry in catalytic converters to reduce harmful emissions, and demand appears to be gaining traction as global auto sales are projected to recover this year. IHS Markit forecasted that global light vehicle sales may increase by 9% in 2021, to 83.4 million, in the wake of recovery from the Covid-19 pandemic. Stricter emission rules and tighter environmental regulations require auto makers to use more platinum as a catalyst, further strengthening its price.

Gold vs. PlatinumMay 2020 to Feb 2021

Gold, Platinum Forecast: Will Supply Shortfall Drive Wider Price Divergence?

Chart by TradingView

A recent report by autocatalyst manufacturer Johnson Matthey pointed to supply shortfall in platinum in year 2019 and 2020. This led markets to wonder if the shortfall would widen further into 2021 if demand from auto makers rebounds strongly. The physical platinum market saw a shortfall of 390k ounces in supply in 2020, up 30% from a year ago (chart below). Autocatalyst accounts for nearly one third of platinum’s total demand. As such, a strong pick up in auto sales may exert an significant impact to the demand side, encouraging more mining and recycling activity to fill up the deficit.

Demand and supply of platinum in year 2019 and 2020 – Estimated by Johnson Matthey

Gold, Platinum Forecast: Will Supply Shortfall Drive Wider Price Divergence?

Source: Reuters

Gold prices, however, remain in a downward trajectory as rising Treasury yields and reflation hopes dampen demand for the yellow metal. US 10-year Treasury yield climbed to an 11-month high of 1.208% on stimulus hopes and prospects of a robust economic recovery. Rising yields and an exuberant stock market rally made the non-yielding yellow metal less appealing as an investment asset. Gold and 10-year yields historically exhibit an inverse relationship, with their past 12-month correlation coefficient standing at -0.22 (chart below).

Gold vs. US 10-Year Treasury Yield – 12 Months

Gold, Platinum Forecast: Will Supply Shortfall Drive Wider Price Divergence?

Source: Bloomberg, DailyFX

Technically, platinum prices broke above a “rising wedge” and extended higher with strong upward momentum (chart below). Prices pierced through the 127.2% Fibonacci extension level and may have opened room for further upside potential with an eye on US$ 1,327 (161.8% Fibonacci extension). The RSI indicator climbed into overbought territory above 70, suggesting that prices might be vulnerable to a technical pullback.

Platinum PriceDaily Chart

Gold, Platinum Forecast: Will Supply Shortfall Drive Wider Price Divergence?

Technically, gold prices extended lower within the “Descending Channel” as highlighted on the chart below. The overall trend remains bearish-biased as suggested by downward-sloped moving average lines. Immediate support and resistance levels can be found at US$ 1,820 (38.2% Fibonacci extension) and US$ 1,840 (23.6% Fibonacci extension) respectively.

Gold PriceDaily Chart

Gold, Platinum Forecast: Will Supply Shortfall Drive Wider Price Divergence?
Gold MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 2% -4% 1%
Weekly 4% 14% 5%
What does it mean for price action?
Get My Guide

IG Client Sentiment indicates that retail gold traders are leaning heavily towards the long side, with 84% of positions net long, while 16% are net short. Traders have increased both long (+3%) and short positions (+5%) overnight. Compared to a week ago, traders have increased short exposure substantially (+14%) and trimmed long bets (-7%).

Building Confidence in Trading
Building Confidence in Trading
Recommended by Margaret Yang, CFA
Building Confidence in Trading
Get My Guide

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES