Outlook:

Short term:
Up
Medium term: Flat
Long term: Up
Resistances:
R1 816 40 DMA
R2 827 100 DMA
R3 828 10 DMA
R4 857 Jun 22 lows
R5 886 200 DMA
R6
910 DTL from Aug 2011 high
Support:
S1 932 Mar 2017 low
S2 892 200 DMA
S3 873 Dec 2017 lows
S4 828 20 DMA
S5 816 40 DMA
S6
S7
811 Jan 2016 low
745 Oct 2008
low
Stochastics:
Crossed lower
Legend:

BB – Bollinger band
COT – commitment of traders
DMA - daily moving average
Fibo – Fibonacci retracement level
HSL – horizontal support line
SL – support line
MACD – moving average convergence divergence
DTL – downtrend line
UTL – uptrend line
H&S – head-and-shoulder pattern
RSI – relative strength index



Analysis

  • Platinum remains capped by overhead selling pressure around $840 per oz from the DTL from the January 25 high.
  • But pressure has been relatively limited with platinum supported by the 100 DMA at $827 per oz.
  • Additional support is seen from the 20 DMA at $829 per oz, which has crossed above the 40 and 55 DMAs.
  • Above the DTL from the January 25 high, stronger resistance is seen from the 200 DMA at $886 per oz, which coincides with a series of chart lows from April-May.
Macro drivers
Equities markets remain under pressure on Thursday October 25, extending the weak sentiment yesterday after the Dow Jones Industrial Average closed down 2.4% and the S&P 500 3.1%.

COT data showed net length among Nymex funds increased for a sixth consecutive week in the week to October 16, after funds cut their shorts by a further 2,662 contracts while increasing their longs by 2,192 contracts. At 30,050 contracts, gross short exposure remains quite sizeable and suggests there is room for further short-covering while sentiment turns less bearish toward the metal.

Despite the price rout, there has been only limited evidence of dip-buying among investors. Exchange-traded fund (ETF) holdings total 2.27 million oz, down from 2.45 million oz at the start of the year.

Despite earlier strength, global light vehicle sales are starting to slow, contracting by 8.5% year on year in September. Sales were up by a modest 1.7% in January-September, according to LMC Automotive, compared with 3.5% growth in January-June.

In addition, diesel-engine sales continue to drop sharply because national authorities are seeking to ban these vehicle from major cities. Suzuki and Mitsubishi are the latest manufacturers to announce they will cut diesel engines from their European line-up.

Impala Platinum, the world's second-largest platinum producer, plans to cut future production by 30% over the next two years following its strategic review. Impala will close a total of five mines, cutting annual production to 520,000 oz from around 750,000 oz currently.

However Anglo Platinum - the world's largest platinum producer - reported refined platinum production totaled 556,200 oz in the third quarter, down 19% year on year as a result of the partial rebuild on the Polokwane smelter. Despite this, Amplats further raised its full-year guidance to 2.45-2.5 million oz from 2.4-2.45 million oz due to strong mine production.

The impact of weaker demand and robust supply are set to keep the market in a surplus, which the World Platinum Investment Council forecasts will total 295,000 oz in 2018, up from the 180,000-oz surplus forecast in May.

Conclusion
Fund short-covering continues to underpin, and has scope to fuel further gains over the short term. But despite the stronger tone in gold and the new lifetime high seen in palladium, platinum is struggling for traction as the negative fundamental backdrop continues to overhang, and despite the volatility in global equities there has been little evidence of haven demand. Without strong demand from investors and signs of greater restraint by platinum producers prices are unlikely to find significant upside leverage.

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.