Is Platinum Ready To Roar Higher?

| August 23, 2013 | 0 Comments

platinumThings are really starting to heat up in the platinum market.  According to a recent Reuters article, workers in the hard hit South African mining sector could strike as early as next week.

Obviously, this presents a problem…

As you may know, South Africa is the largest platinum producing country in the world. 

But years of rising labor costs and dwindling metal prices are pushing mining companies operating in the country to the brink of failure.

In fact, the largest platinum miner in the world, Anglo American Platinum, just announced 7,000 job cuts in South Africa to reduce costs.

Maybe you remember, the last time layoffs like this happened, the situation quickly spiraled out of control.  In August 2012, striking South African miners sent the price of platinum roaring from $1,400 an ounce up to $1,700 in a matter of weeks.

The current labor issues could do the same thing.  Striking workers will likely curtail platinum production at major mines, altering the metal’s delicate supply/demand balance.

The technical outlook is growing more bullish as well… 

You see, platinum is currently trading near a very important resistance level.  If strikes develop over the next few weeks, we could see the metal break through this technical blockade and run to 2013 highs.

Let me show you what I mean…


As you can see, platinum closed at $1,542 yesterday.  That’s just above the long-standing resistance technical resistance line at $1,540.  Should labor issues worsen, there’s a very good chance this commodity will trade at $1,700 in the not-so-distant future.

But here’s the deal…

Even if the labor situation stays under control, platinum’s long-term underlying supply/demand fundamentals still support higher prices. 

You see, the struggling European economy has kept the price of platinum at bay in recent years.  The region’s deep and lingering recession curtailed auto sales, sending the European auto industry into the gutter.

But recent economic data suggests Europe may return to growth soon.  In fact, recent purchasing managers index (PMI) reports show signs of expansion in many EuroZone countries.

If the strengthening PMI trend continues, Europe could well be on its way to a recovery…

That means more Europeans will be buying cars, which in turn increases demand for platinum.  As you may know, the metal is used heavily in the automobile industry as an exhaust system catalyst.

So keep an eye on platinum in coming weeks…

The metal has a reputation for rallying quickly.  If the conditions I discussed above come to fruition, there’s a very good chance platinum will jump to $1,700 by year-end.

One of the easiest ways to capitalize off rising platinum prices is the ETFS Platinum Trust (PPLT).  

Stay tuned to Commodity Trading Research for additional insight on the precious metals markets!

Until Next Time,

Justin Bennett

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Category: Platinum

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.