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After the turmoil in the markets over the last two weeks it is interesting to note the price behavior of platinum and to investigate the reasons for it strengths.
 

On Feb 21st the price dropped to $1210 an ounce and then quickly rebounded to a high of over $1240 an ounce by 26^th only to drop again by $55 to $1185 an ounce seven days later.

 

From that point on until this morning the price has steadily climbed back up to the high ground approaching $1240 by 11.00 a.m. GMT.

 

Technical chart analysts will have their own, and no doubt diverse opinions, on the price movement over the last thirty days. 

 

But we are only mere amateur chartists and have little confidence in our ability to correctly analyze and interpret the technicalities involved in the multitude of time frames that are so eagerly examined by those dedicated to technically forecasting the markets.

 

Once we have decided to go long or short in a commodity, stock or, when we have our gambling hat on, a currency, then our simple rule of thumb comes into play.

 

The limit of our confidence in technical signals is to follow the trend on a three month chart (remember-“the trend is your friend”) and buy the dips in an up trend or sell the peaks in a downtrend and of course steering clear when the chart does not clearly signal a positive trend either way.

 

If we can recognize a signal that the trend is changing direction then we consider whether there has been any significant change in the fundamentals that persuaded us to enter the position in the first place.

 

While on the subject of our application of technical chart analysis we also will look at any signals that despite our ignorance we may recognize as good entry or exit points, generally using a combination of a 15 minute and a daily chart.

 

The logic is straightforward, why pay more or sell for less even though the price movement is not great for the sake of a few minutes checking the charts.

 

It is a particularly important consideration when playing the forex market as the leverage involved can mean a substantial difference in profit or loss just for the momentary movement of a few pips either way!

 

Back to Platinum and possible explanations for its rise from around $1100 per ounce in December 06 to its high of over $1240 in February and its climb back towards that level after the pull back a few days later.

 

More importantly can we draw any conclusions for its behavior for the remainder of the year?

 

In the first place the Feb. pullback from its earlier high was simply a correction caused by profit taking by nervous speculators who felt the need to pocket some cash if the world wide stock markets looked like continuing their downward spiral or releasing profits to buy up cheap stocks or commodities if the opportunity presented itself in a market recovery. Remember that saying – “the trend is your friend!”

 

There is no evidence to suggest any change in the fundamentals relating to Platinum and at this moment in time in our opinion remains bullish on the metal – but this an opinion only and not a recommendation to buy.

 

The precious metals tend to mirror the price of gold in normal price activity although the movements may not be as significant percentage wise as there is not by any means the same speculative weight of money moving the market in platinum, titanium, etc as in gold although silver is often an exception to this scenario.

 

There are occasions when a significant influence occurs with the price of one of the precious metals in the group as was the case when Ford motors committed itself to using palladium in its catalytic converters and built up a huge stockpile when prices spiked above $1075 an ounce in 2001, since which time Fords efforts to lower its stockpile has overhung the market and driven the price down.

 

The price had dropped to as low as around $180 an ounce before recovering.

 

The supply factors have not changed, platinum is some fifteen times rarer than gold, with Russia and South Africa having by far the largest deposits.

 

The supply/demand ratio is still in the balance

 

In 2001 Russia flexed its muscles in the precious metal market by withholding titanium, this action resulted in the price spike referred to earlier.

 

Whose to say they won’t try this trick again with platinum where demand from both the jeweler trade and use in industry is steadily increasing.

 

At the same time there is considerable activity in platinum mining companies. Platinum and other precious metals in the platinum group are mainly produced as a by-product of base metal mining, principally nickel.

 

 Junior miners involved are getting considerable attention from the major mining companies with takeovers, buy outs etc., taking place or anticipated.

 

This interest spills over into the price of the commodity and other investment vehicles that have a piece of the action.

 

There seem to be no major recent changes that would undermine an optimistic current outlook for either platinum or platinum group precious metals.

 

Have a look at the fundamentals for platinum yourselves and draw your own conclusions, we think that you could find this is an effort well worth taking.

 

business investments markets money platinum platinum price precious metals