Very short term (1M):   Up
Short term (3M): Up
Medium term (6M): Up
Long term (12M): Up
Resistances:
R1 806 20 DMA
R2 884 May high
R3 954 Apr 2018 high
R4 1,195 2016 high
Support:
S1 789 May low
S2 789 Feb low
S3 745 Oct 2008 low
S4 708 Mar 2003 high
Stochastics:
Bearish

Legend:

BB – Bollinger band
COT – commitments of traders
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
  • Based on its weekly technical configuration, platinum may have another run lower.
  • This is because the price remains on a downward path - it is trading within a large descending triangle pattern (see chart).
  • A retest of the lower channel remains possible, with a fresh 2019 low potentially in store.
  • The rebound momentum since the May 30 low at $789 per oz has been challenging too.
  • On the daily chart, the spike towards the June 5 high at $833 per oz was merely short-covering - short-sellers have re-established control.
  • Still, the prevailing downward trend should give sellers an edge in the short term. This fits with our weekly technical assessment.
Macro drivers
Simmering US-China trade tensions continue to weigh on global economic growth, indirectly affecting automotive sales in key trading regions.

Chinese car sales in May had their worst year-on-year decline of 16.4%. According to the China Association of Automobile Manufacturers (CAAM), one key reason for the drop was the implementation in several provinces of “China 6” vehicle emission standards earlier than the central government deadline of 2020. Poor Chinese economic data continues to paint a bleak picture of consumer confidence, undermining demand for big-ticket items such as automobiles.

In Europe, passenger car registrations fell by 2.6% in the first four months of 2019, according to the European Automobiles Manufacturers Association (ACEA). And LMC Automotive estimates US auto sales fell by 2.1% in May due to higher vehicle prices as well as borrowing costs. The consultancy maintained its forecast for total light-vehicles sales of 16.9 million units in 2019, a 2.5% fall from 2018.

Given such a challenging demand backdrop for platinum, Nymex speculators were understandably bearish on platinum speculative funds positioning. Its net long fund position has declined for the sixth consecutive week, falling to 6,952 contracts in the week to June 11. Stale longs liquidated 781 contracts, which was partially offset by the covering of 684 short contracts. With no sign of dip-buying pressure yet, a further decline in the coming weeks in platinum’s NFLP cannot be ruled out.

While platinum struggling on the upside due to a continued slowdown in global automotive sales, a potential disruption among South Africa’s leading platinum producers is looming.

The Association of Mineworkers and Construction Union (Amcu) is aware that higher palladium and rhodium prices along with the weaker rand has boosted miners’ profits. The union is using this as a basis to demand higher wages. The relationship among South African trade unions and the producers’ strategic decision to cut costs have raised the potential of industrial action. Rising electricity costs and power shortages were among the issues that platinum miners have faced this year. We will monitor Amcu’s demands and how much platinum producers are willing to offer to avert a major strike.

Conclusion
Platinum’s technical configuration indicates that there is more downside to be had in the very short term; we are not ready to change our view on that just yet. But we remain mindful that a full-blown strike is a game-changer - one that could easily change the market’s perception about platinum’s price action.


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