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.

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.

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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.

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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.

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Equities Contributor: Chris Vermeulen

Source: Equities News

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