Platinum breaks through the downtrend line

The platinum price has been moving in a downtrend for the last 2 months. During this time, the metal has lost more than 20% in price, but there are prerequisites for changing the situation for the better. On Monday, the bulls made an attempt to change the trend, and a small correction on Tuesday couldn’t change anything. Even the first rebound target of 950 has not been reached yet, so the price has much room for growth.

Increasingly high interest rates in the US and the EU put pressure on platinum, as well as on other precious metals. That’s the reason why the Bank of America analysts worsened their price forecasts for gold, silver, platinum and palladium. And platinum was subjected to the most negative revaluation: expectations for the end of the year were worsened from $1168 to $1068 per ounce (by more than 8.5%).

According to analysts, the strengthening dollar and rising US bond yields are reducing investors’ interest in precious metals. The suppressed demand from the industrial sector has a negative impact on the price too. However, next year representatives of Bank of America expect significant price growth as the global economy recovers and central banks move to ease monetary policy.

Massive closing of short positions may also affect the platinum prices. According to Saxo Bank, in the first week of July platinum market traders had a net short position for the first time in 4 months. At the same time, in the case of gold, the trend has already reversed, and the number of short positions has noticeably decreased. Market participants will probably pay attention to other precious metals over time.

The first growth target for platinum is the 23.6% Fibonacci level ($950). If it’s reached, the target will be a 38.2% Fibonacci level ($985). The RSI reversed from the oversold zone and confirms the positive signal.

The following trading strategy can be suggested:

Buy platinum at the current price. Take profit 1 — 950. Take profit 2 — 985. Stop loss — 925.