The replacement of expensive raw materials with cheaper ones, the growth of investment demand, and the rapid recovery of the eurozone GDP in the second quarter create favorable conditions for continuing the XPTUSD rally. Let’s discuss this topic and make up a trading plan.

Fundamental platinum forecast for a quarter and a year

Any depression ends sooner or later. Over the past ten years, platinum has been depressed and often lost to other assets in the precious metals sector due to problems in the automotive industry. Only the pandemic and recession brought the XPTUSD bulls to their senses, and in 2021 they are ready to prove that they are worth their salt. The rapid growth of the global economy led by the industrial sector, acceleration of inflation, increasing of global demand and ETF stocks allow us to be optimistic about the future of platinum.

Since the summer of 2018, the analyzed asset has been losing out to palladium after manufacturers of diesel cars, which mainly use platinum, were caught manipulating to pass emissions tests. The reorientation of consumers to vehicles with gasoline engines sharply inflated the XPDUSD prices and drove the XPTUSD bulls into depression. The gap in prices began to widen rapidly and by February 2020 exceeded the $1,500 mark, which made manufacturing companies think about replacing the more expensive metal with a cheaper one. As a result, BASF SE, a German multinational chemical company, developed a new technology to partially replace palladium with platinum in gasoline engines, which, in my opinion, will help narrow the spread.

Platinum and palladium dynamics

  

Source: WPIC.

About 43% of the analyzed asset demand is associated with the production of autocatalysts, while the share of investment demand rarely reaches 15%. I believe that against the backdrop of accelerating inflation, this indicator has the potential to grow, which may become another driver of the XPTUSD rally in 2021. The “blue wave” in the USA led to a sharp increase in Treasury bonds yield. However, rates on treasury inflation-protected securities (TIPS) continue to be near record lows. This state of the US debt market suggests that investors are confident in the Fed’s intention to adhere to ultra-easy monetary policy for a very long time. This creates favorable conditions for the entire precious metals market and investment demand. At the same time, interest in platinum from European investors is consistently high. Even ETF capital outflows during the recession were slower than in other regions of the planet.

Platinum ETF Stock Trends

Source: WPIC.

Strong demand from Europe explains the strong correlation between XPTUSD and the euro exchange rate. In case of acceleration of the vaccination process in Europe, liftings of lockdowns, and the associated rapid growth of the eurozone GDP in the second quarter, the EURUSD pair will continue to rally. It should work for platinum’s benefit.

EURUSD and platinum dynamics

  

Source: Trading Economics.

Platinum trading plan for a quarter and a year

Thus, the replacement of palladium for platinum in the autocatalysts’ production, the acceleration of inflation favorable for all precious metals, an increase in ETF reserves, as well as the prospects for EURUSD growth, make it possible to expect the XPTUSD rally to continue. In December, I indicated 1150 and 1330 as medium and long term targets. It’s time to improve the outlook for platinum to $1200-1235 per ounce during the first quarter and to $1330 before the end of the year. I would suggest buying the…



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