Platinum prices have been performing a downside movement since mid-July as they fell from $1146 per troy ounce to $1054, or by almost 8%. Platinum went under a global sell off of risky assets used for the production of other items – crude, stocks, metals, etc. fell victim to negative market sentiment as new, more contagious and deadly COVID-19 Delta and other strains spread around the globe.
Besides, signals of possible early tapering of monetary stimulus in the United States due to the rise in inflation levels are seen to be much more visible recently . The loose monetary policy of the Federal Reserve (Fed) and its massive liquidity injections are seen to be responsible for the skyrocketing of commodity prices in late 2020 and so far this year.
However, since the middle of this week the downside spin in platinum prices seem to be over, mainly due a technical reasons. Platinum October futures prices reached a strong support level at $1050-1054 per ounce. So, a technical rebound to the level of $1075-$1080 was expected after a major decline in prices. Prices may go even higher after a short pause to the level above $1100 per ounce.
Nevertheless, by the end of this week prices are unlikely to experience elevated volatility and may stay in the range between $1064 and $1100 per ounce. Some volatility might be expected today after the publication of Purchasing Managers’ Index (PMI) reading in the United States, Europe and the UK. So far, the European economy is sending positive signals as Manufacturing PMI for July rose to 62.6 points, beating 62.5 points consensus, while Manufacturing PMI in the UK dropped down to 60.4 points below 62.7 points expected by analysts. Generally, prospects of a possible upside in platinum prices might be brighter than previously expected amid recovering global production and car manufacturing in particular. So, investments in this asset may be considered at $1067-1070 per ounce at mid-term perspective. The first technical target price for platinum is at $1137-1138 per ounce, or June highs.
It may be worthwhile to remember that 36-43% of total platinum production is used in vehicles production, 21-26% in other industries, 26-35% in the making of jewelry, and around 15% is used as a base for investments, according to World Platinum Investment Council (WPIC).
The major driver for a possible upside movement of platinum prices is a global economic recovery and vehicle manufacturing. On the other hand, supply of platinum is limited now that South Africa - the largest platinum producer - is still suffering from the pandemic and a lack of vaccines.
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