Platinum price has been under pressure in recent months amid a strong US dollar and heightened concerns over the global economic growth. Even so, there is hope that its demand will rise in coming months based on its use in green technologies. In the short term, the focus is on the Fed’s policy decision and overall market sentiment.
What’s driving the market?
High inflation and slow global economic growth have been the main bearish drivers in the platinum market. As an industrial metal, its demand is largely pinned on productivity in major economies such as China, Japan, the US, and Eurozone. Since earlier in the year, those economies have been under pressure from the Russia-Ukraine war, COVID-19, and high inflation.
Nonetheless, a bullish demand forecast is set to boost platinum price in coming months. A report released by the World Platinum Investment Council (WPIC) indicated that the recently approved Inflation Reduction Act (IRA) will improve the metal’s demand. Seeing that it is largely used in green technologies, the previous infrastructure package is also set to boost demand.
In the ensuing sessions, the US dollar will be a key factor to watch. As is the case with other dollar-priced assets, platinum price tends to move inversely to the value of the greenback. The recent US CPI numbers cemented expectations of another super-sized interest rate hike of 75 basis points.
Investors are now keen on Fed’s meeting in the coming week for further cues on the bank’s move in subsequent months. An environment of high interest rates has strengthened the greenback while weighing on industrial and precious metals; two classes that platinum is part of.
Platinum price prediction
Platinum price has been under pressure for the better part of the year as observed in the downtrend highlighted in red. In early March, it rallied to a level last seen in September 2014. Since then, it has dropped by close to 25%.
The formation of a head and shoulder pattern, which is a bearish pattern, suggests that platinum price will remain under pressure in coming months. Granted, the precious metal has been on a rebound for about two weeks now after forming a bullish double bottom. In fact, it is trading above the 25 and 50-day exponential moving averages as seen on its daily chart.
Even so, the neckline at 917 may remain a critical resistance zone in the short term. As has been the case since the beginning of the week, platinum price may remain range bound in the ensuing sessions with 875 and 915 being the borders to look out for. Past the aforementioned support level, the bears will have an opportunity to retest the lower level of 840.