These Two Metals Have Big Upside…
Whew…
What a week in the commodity markets!
As you’ve likely heard, Washington politicians came to a last minute deal to raise the debt ceiling on Wednesday evening. Doing so averted a financial crisis and ended the US Government shutdown.
Thank goodness those clowns in Washington finally came to their senses. It’s highly concerning to me that politicians are willing to take our country to the brink of disaster to try and score political points.
But I digress…
Instead of talking politics, what I really want to show you today is platinum and palladium’s reaction to the announcement of the debt deal. Both metals surged in Thursday trading.
In fact, platinum roared higher by $38.30 an ounce (2.7%) while palladium jumped $22.65 (3.16%). Yesterday’s gains are the biggest these two metals have seen since early August.
And take a look at this…
Platinum is forming a bullish inverse head and shoulders pattern. These formations can occur at the bottom of a downtrend, and point to increasing odds of higher prices in the near future.
It may sound confusing, but it’s actually very simple…
Inverse head and shoulders patterns are a reflection of decreasing selling pressure. In other words, investors can’t take the market as low as they did previously. Once investors realize the asset will fail to reach the old low (or the “head” of the pattern), they switch to the long side of the market.
And that’s not all…
Palladium is forming a bullish pattern as well. As you can see, the precious/industrial metal is on the verge of breaking higher out of a triangle consolidation pattern (blue lines).
As I explained in a recent article on copper, triangle formations are highly indicative of a big price move in the near future.
But remember, there’s no way to tell which way the market will break just by looking at a chart. In other words, we could see a big price move in either direction based solely on technical analysis.
But that’s where fundamentals play an important role…
As I’ve mentioned many times in recent weeks, supply/demand fundamentals for platinum and palladium are extremely bullish. In fact, commodity analysts at CPM Group suggest palladium demand will outweigh supply by 60,000 ounces in 2014. Similar fundamentals are present for platinum.
And that’s not all…
We don’t realize it yet, but the recent US Government shutdown likely did damage to the US economy. That’s why several Federal Reserve board members are now suggesting tapering will be put off until early 2014… at the earliest.
Such a scenario is bearish for the US Dollar and bullish for precious metals.
So keep an eye on platinum and palladium…
With increasingly bullish fundamentals and technical patterns pointing to higher prices, we may see these metals start advancing rather quickly.
Stay tuned to Commodity Trading Research for additional coverage on all the hard asset markets!
Until Next Time,
Justin Bennett
Category: Palladium, Platinum, Precious Metals
