Platinum Breaks $1000 on Big Rally; What's Next?

Chris Vermeulen  |


Certain precious metals—gold, silver and platinum—have shown moderate upside moves in price, trending over the past 20+ months while rhodium and palladium have skyrocketed higher. These more precious metals have many industrial and consumer uses. Rhodium is used in electronics and plating, and palladium is used in a variety of consumer products from automobiles to medical devices.

Still, the rally in rhodium (over 300%) and palladium (over 70%) over the past 12 months has been more than impressive. Whey are we not seeing a similar rally in the other metals?

The reality is that the moves in rhodium and palladium are similar to what we saw in 2004~2008, just prior to the global credit crisis. Take a look at the composite charts below.

There are few interesting components of these charts that show how precious metals reacted throughout the 1997~2000 rally and the 2005~2008 rally. Both of these events set up a bubble burst reversion event.

  • Rhodium rallied extensively in 2005 through 2008, peaking at levels near $10,000 just before the credit crisis bubble burst.
  • Palladium rallied a moderate amount in 2005 through 2007, then sold off as the bubble burst, then rallied to over $800 after fear set into the markets.
  • Platinum began a rally in early 2000 that propelled it to a peak in 2007, just before the peak in the US stock market. Since then, wild price rotation and a moderate reversion to levels near $1000 have set up a massive basing pattern.
  • Palladium, being an industrial use metal deployed in a variety of advanced technology, tends to rally as demand for technology products and consumer products associated with palladium components are in very high demand, much like what happened in 1998~2000.
  • Rhodium’s rally is tied to manufacturing and institutional demand across the globe.
  • Platinum and gold may be set up for a significant upside price rally should rhodium and palladium extend their rallies even further.
  • We find it fascinating that rhodium rallied nearly 1000% from 2004 to 2009, just before the peak in the global stock markets and the start of the global credit crisis.
  • We also find it interesting that palladium rallied over 1000% from 1995 to 1999, just before the dot-com bubble burst.
  • We believe the rallies in rhodium and palladium are early warning signs that can’t be overlooked by skilled traders/investors.

The recent upside breakout of platinum falls into the same category as the late 1998 platinum rally as the valuations of the dot-coms began to overextend. We believe this shift into high-value risk protection began to take place as investors’ fear levels increased in the late 1990s. As we suggested recently, this represents a shifting of the undercurrents in the markets.

The current rally above $1000 in platinum suggests a new upside price rally is taking place after an extensive basing pattern (2015 to now). Should platinum rally above $1200 per ounce, a new technical bullish trend will be confirmed.

Click to enlarge

Our proprietary Fibonacci price modeling system is suggesting price targets on the weekly chart of $1090, $1130 and $1215. Pay very close attention to this rally in platinum as it could become the catalyst for a much bigger move in many of the major precious metals. The platinum rally in 1997 began an upward price advance of nearly 600% over the next 10 years. A similar percentage move today would put platinum near $6000~$7000. Gold would be near $3200+ should this happen.

Click to enlarge

Our belief is that the rally in platinum will continue as valuations in the global markets push higher. Fear is creeping back into the markets as investors are expecting some type of price reversion event. We believe the current setup is very similar to a mix of the events we’ve highlighted in the composite metals chart above—a mix of what happened in 1995~1997 and in 2005~2007. Platinum and gold are acting very similar to what happened in 1995~1997. Palladium and rhodium are a mix of 1995~1997 and 2005~2007. Overall, the rallies in rhodium and palladium are strangely similar to “peak everything” bubbles.

Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research. It is provided for educational purposes only. Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed. Visit our web site, www.thetechnicaltraders.com, to learn how to take advantage of our members-only research and trading signals.

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Equities Contributor: Chris Vermeulen

Source: Equities News

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.


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