Platinum prices have been in a steady downtrend for the past two months. Platinum lost about 20% over this time, declining from a high of January 9 at 1115.9 to a low of February 27 at 903.2. However, the beginning of this week is more than successful for platinum, as its total rise has already exceeded 6%, and the price is testing the falling trend line for the chance to break it through.
In addition to signs of technical oversoldness, platinum’s rebound was also driven by fundamental factors. Chief Executive Officer at Anglo American Platinum (Amplats) Natascha Viljoen outlined how the geopolitical situation and power crisis in South Africa affect global supply of platinum group metals.
Amplats CEO noted frequent breakdowns of coal-fired power stations, which lead to prolonged power outages in South Africa. Therefore, the production of platinum group metals in the country might decline by 5% in 2023.
Russia, the world’s second-largest producer of platinum group metals, continues to mine and sell the metals but experiences certain difficulties with access to spare parts to repair equipment. Since South Africa and Russia are the main producers of platinum group metals, supply of these metals in the global market might be reduced in 2023, followed by a rise in prices.
On the demand side, increased need for platinum is expected from global vehicle production, as well as oil refining and chemical industries in China. Overall, platinum is one of those metals, demand for which will constantly rise during the energy transition.
At the current moment, platinum has reached the first rebound target, consolidating at the Fibonacci level of 23.6%, or 954. If a breakdown of the downtrend line is confirmed, platinum will immediately head towards the Fibonacci level of 38.2%, or 985. The RSI confirms the current upside momentum.
The following trading strategy may be offered:
Buy platinum in the range of 955-965. Take profit – 985. Stop loss – 945.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.