Platinum price remains in a bear market amid concerns that inflation will likely yield a cool-off of the automobile market. Other industrial metals are also on a downtrend amid demand concerns.
Key drivers
Platinum is both a precious and industrial metal. As such, the actions of the Federal Reserve, coupled with the demand/supply dynamics are the key drivers of the market.
Similar to other industrial metals, platinum has been under pressure from the slowed global economic growth. Granted, the easing of the COVID-19 restrictions in China has boosted the market sentiment. While China is the leading consumer of industrial metals, it cannot trigger a trend reversal by itself.
Platinum is largely used in the automobile industry in catalytic converters. With the heightened inflationary pressures,people’s focus is shifting to their basic needs at the expense of wants such as vehicles. Subsequently, the probable cooling off the automotive market will likely continue to weigh on platinum price.
At the same time, investors forecast more aggressive interest rate hikes from the Fed after the super-sized increase of 75 basis points earlier in June. The Fed’s hawkish stance has strengthened the US dollar while exerting pressure on platinum price. As at the time of writing, the dollar index was at $105.10; up by 0.59%.
Platinum price technical outlook
In 2021, heightened demand boosted platinum price to $1,337.35; its highest level since September 2014. However, in recent months, there has been a trend reversal that has seen the metal hit a fresh low year-to-date.
At the beginning of the week, it hit an intraday low of 902.88; its lowest level since December 2021. granted, it has since bounced off those lows as the psychological level of 900 remains a steady support zone.
Even with the rebound, I expect platinum price to remain under pressure in the short term. As shown on a daily chart, it is still trading below the 25 and 50-day exponential moving averages. Besides, the formation of the bearish head-and–shoulder pattern hints at the downtrend remaining in place in the short term.
In particular, the range between 915.31 and 936.02 will be worth watching in the ensuing sessions. Notably, the range’s lower border is at the neckline of the head-and-shoulder pattern. A further rebound will likely place the resistance level along the 25-day EMA at 943.62. However, for the bulls to get a chance at reversing the current trend, they will need to gather enough momentum to push palladium price past the 50-day EMA at 958.12.
