Platinum price is being punished: Should you catch a falling knife?

By:
on Feb 15, 2023
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  • Platinum price has been in a freefall in the past few weeks.
  • The American yield curve has fallen to the lowest point since the 1980s.
  • Platinum could stage a brief recovery or a dead cat bounce.

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Platinum price continued plunging this week as the American yield curve plunged to the lowest level in decades. It retreated to a low of $917 on Wednesday, the lowest level since November 2022. The precious metal has plunged by over 16.7% from its highest level this year, meaning it is approaching a bear market.

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Yield curve inversion continues

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Platinum and other precious metals like silver, gold, and palladium have declined sharply in the past few weeks. The sell-off accelerated after the US published strong jobs numbers earlier this month. These numbers revealed that the country’s unemployment rate retreated to 3.4% as the economy added over 500k jobs. 

As I wrote in this article on Tuesday, the inflation numbers showed that prices remained at an elevated level in January. The headline CPI came in at 6.4%, slightly above the expected 6.2%. Therefore, these numbers imply that the Federal Reserve has more room to continue hiking rates in the coming months.

This situation could worsen the yield curve, which has crashed to the lowest level since the 1980s. The yield curve is a measure of the difference between the long and shorter-term government bonds. In the past, an inverted yield curve has come ahead of a major recession.

Platinum, unlike precious metals like gold, is exposed to macro performance of the economy because it has industrial use. Together with palladium, platinum is used to manufacture catalytic converter, which is used in the vehicle industry.

Platinum price has also crashed because of the slow recovery of the Chinese economy. Flash numbers show that, despite the reopening, the country’s economy is still struggling. This is important because China is one of the biggest consumers of platinum products. Further, there is a possibility that platinum supply will continue rising this year.

Platinum price forecast

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platinum price

Platinum chart by TradingView

Platinum’s crash has been tough. On the 4H chart, the metal has formed a descending channel and is currently at its lower side. It has also moved below the important support level at $961, the lowest point on November 21 last year. 

The decline has also been supported by all moving averages while the Relative Strength Index (RSI) has moved below the oversold level. Therefore, while the outlook is still bearish, we can’t rule out a situation where platinum price makes a comeback and retests the resistance at $961.

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Palladium Platinum Commodity Precious Metals