Platinum Trades at a Discount Against Gold

Platinum has been on a steady decline with slow demand.

Bullion.Directory precious metals analysis 3 March, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Senior FX and Commodities Analyst at FX Analytics

Platinum has been trading at a discount to gold since last month. The spread between the two precious metals has tightened, but were recently at their widest in two years. Platinum, although grouped in with gold and silver as a precious metal, is typically lumped into the industrial group with palladium. Platinum has many uses in industry, most notably in catalytic converters.

With economic data deteriorating globally, there has not been much demand for the metal, which is more rare than gold. The spread between the two widened because gold is an infamous “safe haven” hedge against economic and geopolitical uncertainty.

However, some analysts believe the spread will continue to tighten as platinum rebounded off its 5 year low. Caroline Bain, senior commodities economist at Capital Economics, said demand from China could spur a rally. Although demand has been weak of late, China is notorious for picking up platinum when it is discounted to gold.

Technically, volume has been weak and dropped off in recent weeks. Prices found support near $1,155, while a close below this level opens up a potential drop to $1,087/85. While, if prices can gain a little strength, prices could challenge $1,224/28 – near the 20-week EMA. The RSI is hovering just above an “oversold” level at 35, but prices have been comfortable within the lower bound.

A rally in platinum will likely need a catalyst for ignition.

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