Platinum Prices: Look Out Below…

| August 6, 2015 | 0 Comments

platinum pricesPlatinum Prices: Buy This Heavily Oversold Metal Now?

The commodity selloff of the past year has been hard to ignore.  Hard assets as a whole have suffered from a surging US Dollar and ongoing concerns over global growth.

One of the most noticeable markets controlled by commodity bears is platinum.  The once lustrous metal is down 35% from this time last year, and is suffering from a 20% downturn in 2015 alone.

It’s an outrageously bearish chart…

Platinum Prices $PLAT - 1 year chart

As you can see, after putting in a relatively strong January 2015 performance, the metal has gone straight in the gutter.  This year’s selloff accelerated the past two months, which took platinum below $1,000 an ounce for the first time since early 2009.

With the metal trading at the lowest price in years, is it time to buy?

Only if you like losing money…

With the metal stuck in a debilitating technical downtrend, buying now is akin to stepping in front of oncoming freight train.

Remember, trying to pick tops and bottoms in markets is one of the worst mistakes a trader can make.  For more of the bad habits traders tend to make, and how to alleviate them, follow the link.

With that said, you can possibly make a case for buying platinum right now if you’re an investor with a long time frame and can withstand even lower prices.

Speaking of lower prices, look at this long-term chart…

Platinum prices $PLAT - long term chart

As you can see, the metal has nearly $150 an ounce further to fall before it reaches the 2008 low at $800 an ounce.  Given the overwhelmingly bearish sentiment and disastrous chart, this important price point will likely be realized before 2015 comes to an end.

Is there any hope for platinum in the long run?

As bad as this market is right now, bulls will eventually return.

You see, South African platinum miners are falling on hard times with the metal they produce diving lower with each passing day.  As you may know, South Africa is home to the world’s largest Platinum Group Metal (PGM) mines and holds around 80% of the world’s proven reserves.

Platinum prices are so low that a large swath of the South African PGM mining industry is now producing the metal at a loss.

The situation is so bad at Lonmin, one of the larger South African miners, the company is laying off 6,000 workers.

Folks, it’s only a matter of time before layoffs and mine closures become widespread.

Once the South African PGM mining industry’s capitulation point is reached, that’s when bulls will likely return to the platinum market.  With that said, it’s very challenging to accurately predict at what price that will happen.

For now, it’s best to just sit back and watch the fireworks as platinum plummets to new multi-year lows.

Is there a way to capitalize on plummeting platinum?

Of the three platinum based commodity exchange traded funds available to investors, there’s only one I feel relatively comfortable trading.  The ETFS Physical Platinum Shares $PPLT has a decent amount of intraday liquidity with a manageable bid/ask spread.

At this point, shorting $PPLT until platinum hits $800 an ounce is your only viable strategy for profiting from the metal.

Until Next Time,

Justin Bennett

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at http://commoditytradingresearch.com/free-sign-up.

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Category: Platinum, Precious Metals

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.

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