Platinum price analysis: bearish engulfing pattern forms

on May 20, 2024
  • Platinum price has soared by over 25% from its lowest point in 2023.
  • The supply is expected to grow at a slower pace than demand.
  • There are signs that platinum's automotive demand is soaring.

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Platinum price has been in a strong uptrend this year, joining other industrial metals like copper and zinc. It has also joined other precious metals like silver and gold, which have been in a strong bull run. It soared to a high of $1,095 on Monday, its highest level since March 11th.

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Platinum has also outperformed palladium, which has risen by just 20% from its lowest point in 2023. 

Demand and supply mismatch

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Platinum has done well this year, helped by strong demand and slow supply growth. A recent report by the World Platinum Council showed that automotive demand for platinum surged to its highest point in seven years in Q1. 

Jewellery and investment demand also continued rising during the quarter while the industrial one dropped from its record high in 2023. It remains higher than where it was before the Covid-19 pandemic.

Platinum supply, on the other hand, crashed to its lowest level in decades and the trend will continue. The council estimates that supply will remain flat at 7,111 koz while demand will rise to 7,587 koz. It will be the second straight year of platinum supply deficit.

Platinum production has remained under pressure as most companies slashed their activity because of the price movements. It dropped by over 37% from its highest level in 2021 to its lowest point in November last year.

Mining companies are avoiding platinum because of the general view that the automobile industry is moving towards electrification. For example, one condition for BHP’s buyout of Anglo American is for it to shed its platinum business.

Still, data shows that ICE vehicles are here to stay, as evidenced by the performance of companies like Toyota, Stellantis, and General Motors. These companies are doing better than pure EV firms.

Lack of investment will likely lead to a supply squeeze as we have seen with the cocoa industry. One reason why cocoa jumped is that investments in the sector remained significantly small because of the weaker prices.

Platinum is also thriving because of the rising hopes that the Federal Reserve will start cutting interest rates later this year. Recent data revealed that the country’s headline and core inflation figures retreated slightly in April.

Platinum price forecast

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platinum price

Platinum chart by TradingView

The daily chart shows that the price of platinum has been in a strong bull run in the past few months. It recently jumped above the crucial resistance point at $1,013, its highest swing in December.

The stock has also formed a golden cross pattern, when the 200-day and 50-day moving averages cross each other. Therefore, the outlook for platinum is bullish, with the next point to watch being $1,125, its highest point in April 2023. 

However, in the short-term, it will likely go through turbulence since it has formed a bearish engulfing pattern, a popular reversal sign.

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