FxWirePro: Platinum takes two to tango, offload shorts to book yields and jump on bandwagon

In this write-up, we emphasize to take half profit on short Jan’18 NYMEX platinum owing to few fundamental drivers.

Stringent emissions standards in China (the world’s major auto market), are serving to drive the price of palladium, a rare emissions-reducing metal, to new highs in recent weeks.  

In fact, the price of palladium surged that of its better-known cousin, platinum, for the first time since 2001 this week. The two metals, which are similar chemically, are used in the manufacture of catalytic converters to help reduce toxic exhaust from cars and trucks. Palladium is usually used in gasoline-burning vehicles, which are currently gaining the upper hand over diesel vehicles, which tend to use more platinum.

Moreover, as gold loses its luster in 4Q, we reckon that the recent support platinum enjoyed from July through early September will continue to break down as well, especially given that the fundamentals for platinum remain non-compelling to say the least.

As fresh longs established amidst the rally in prices over the last couple months have driven net positioning long again to nearly 24,000 contracts, almost level with the peak in net length reached earlier this year, we see length approaching stretched levels.

As such, we see prices declining to average $930/oz in 4Q’17 before weakening further to $910/oz in 1Q’2018. We elected to take half profit on our position and trail our stop for the remaining half unit to $950/oz as prices approached a key technical make or break at between $923/oz and $890/oz.

The shorts were encouraged in Jan’18 NYMEX platinum at a price of $975.20/oz in the recent past.It is advised to book half profit, at around 924.10/oz for a gain of 3.0%. 

We offload half and uphold the outstanding half unit that is to target at $880/oz with a stop for the remaining 0.5 units at $950/oz.