Platinum Prices Vulnerable To Further Losses
New York (Apr 23) Platinum prices could be vulnerable to further losses in the near-term, although metals analysts remain bullish on the white metal in the long-term.
Since setting a high on April 14 of $1,471.50 an ounce, basis the New York Mercantile Exchange July contract, platinum prices are down 5%. As of 11:05 a.m. EDT, July platinum traded at $1,399.40.
Much of the gains for platinum came on the continuation of the strike by the Association of Mineworkers and Construction Union against the major South African platinum producers, Anglo American Platinum, Impala Platinum and Lonmin. The strike is in its 13th week.
Platinum prices started to fall when gold had its big tumble on April 15, but the white metal extended those losses on news April 17 that South African miners Implats and Amplats sweetened an offer to the striking workers. July platinum dipped below $1,400 Tuesday and so far is holding right around that psychologically important level.
Bart Melek, vice president and head of commodity strategy at TD Securities, said platinum could be at risk for further losses if the strike ends. That has a greater likelihood of happening since the AMCU went to its members with the latest offer, some platinum analysts say.
Miners offered to raise basic wages to ZAR12,500 a month in five years, while the workers want to reach that level within three years.
Yet Edel Tully, metals strategist at UBS, said with last week’s break, platinum has removed much of the strike-related premium. When the strike started on Jan. 23, July platinum settled at $1,465.
However, she said, prices could be vulnerable to further weakness because “with spec positioning very elevated, platinum is indeed at risk of a potential weighty sell-off.”
Looking at the Commodity Futures Trading Commission’s weekly commitments of traders legacy report for platinum, as of April 15, the large speculative net-long position was 44,967 contracts, the highest in a month. A more detailed look at that figure shows a very small gross short position of 6,568 contracts versus 51,535 gross longs.
Melek said speculators are “pretty long” not only according to CFTC data, but also when one takes into consideration the growth in physically backed exchanged-traded fund holdings.
Both Melek and Tully said they are watching platinum’s technical charts for support areas in case the market does lose further ground now that the metal pierced $1,400.
“Technically, there’s scope for a test of $1,382.22, the 62% retracement of the December-March advance, with any close below this an outright bearish development as it will confirm a new bearish trend in force with MACD (moving average convergence-divergence) below its zero line,” Tully said.
She said traders need to also be aware that unlike gold, platinum liquidity is much thinner, “especially during sell-offs when that exit door can get very narrow and price action becomes very erratic.”