“Bulls” in the platinum market prevent a breakdown of the uptrend

Significant sell-offs at the platinum market took place on Friday. The price fell by more than 3.5% at some points, breaking down the rising trend line and the lower limit of the uptrend. But the "bulls" managed to seize the initiative and redeem all the drawdowns by the end of a trading session. The trend breakdown turned out to be false. This may encourage buyers and push prices higher to the level of 1000.

More and more analysts, however, predict a deficit in the platinum market. Platinum group metals (PGM) production is likely to resume its decline, as stated by Paul Dunn, Northam Platinum CEO. This is caused by the lack of new mining projects, deteriorating production base and challenging operating environment in South Africa, being the world's second-largest PGM manufacturer after Russia. 

Northam Platinum anticipates that PGM supplies will stay at their current levels until 2027 or so, followed by a gradual decline in production. The demand for PGMs, on the other hand, has been growing fast in the last few years. The reason is that new ways to use these metals have emerged, including hydrogen power engineering, food preservation, new advancements in medicine, and other industries. 

But the cost of mining ventures is also high, that’s why producers experience difficulties in exploiting new deposits. It takes about eight years to start generating profit from the moment the mine is launched. But new facilities are essential to maintain supply, Dunn said. Growing demand, tight supply and higher mining costs could push PGM prices higher in the long term.

Platinum prices have not settled below the 970 level so far, and the upward trend is still predominant. There have been ongoing attempts to reach the upper limit of the uptrend recently but no significant progress was made. That’s where the level of 1000 comes into play. Subsequent growth could be possible, with the price moving higher than 1000.

The following trading strategy can be suggested:

Buy Platinum at the current price. Take profit – 1000. Stop loss – 970.

Traders can also use Trailing stop instead of a fixed Stop loss at their discretion