Platinum price prediction amid heightened risk

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Sep 3, 2021
  • The shortage of semiconductor chips is weighing on platinum price, which is hovering around $1,000.
  • Ford and General Motors are among car manufacturers that have cut production.
  • Weakening US dollar has buoyed platinum price above August's low.

Platinum price has been trading within a horizontal channel for a month now. Its curbed gains stem from the ongoing chip shortage and subsequent cuts in car production.

platinum price
platinum price

Decline in car production

Platinum price is under pressure as the automotive industry grapples with the ongoing semiconductor chip shortage. The scarcity has evolved from what appeared to be a short-lived problem in the year’s first half to one that will likely continue into the next year.

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Subsequently, various car manufacturers have had to cut production. On Thursday, General Motors (GM) indicated that it will add or extend downtimes at eight of its car manufacturing plants within Mexico, the US, and Canada. The affected models include the Chevrolet Blazer as well as its midsize and full-size pickup trucks.

Notably, Ford is experiencing a similar challenge. The chip shortage resulted in the company’s new car sales declining by 33.1% from the same period in 2020. In August, its adjusted selling rate was at 13.09 million automobiles. The figure is the lowest since June 2020. Besides, it is significantly lower than this year’s highest level of 18.5 million, which was attained in April. The sales pace is used as a measure for demand and overall health of the automobile industry.

While the cuts in car production have curbed platinum price gains, the weakening US dollar has buoyed it above August’s low. This is largely due to the inverse correlation between the value of the greenback and that of precious metals. For close to two weeks now, Palladium price has been trading between $2,400 and 2,500 while silver has been within the range of $23.35 and $24.25.

Platinum price technical outlook

Platinum price has remained within a horizontal channel since early August. Over a span of one month, the precious metal has been trading between the support and resistance levels of 962.96 and 1025.12 respectively.

At the time of writing, the metal was up by 0.28% at 1,003.40. On a four-hour chart, it is trading slightly below the 25 and 50-day exponential moving averages.

In the short term, I expect platinum price to remain within the horizontal channel. As the week comes to an end, it will likely hover around the psychological level of 1,000. Subsequently, it will trade within a narrower range of between the week’s low of 990.22 and Thursday’s high of 1,012.21. A further rise will likely have its gains curbed at 1,025.12. In the ensuing sessions, it will likely remain buoyed above August’s low of 962.96.

platinum price
platinum price
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