One of the predictions around the time of the Global Financial Crisis was that given the implosion in the world of fiat money, Gold would soar as a store of value. It did not. A decade on, it has still not done so despite being at multi-year highs. Indeed, the rather ephemeral Bitcoin overtook Gold many months ago, and real estate remains the store of value of choice. But it may be that Gold has an unlikely ally in the Platinum Group Metals, with these both underpinning it (due to historic price relationships) and revealing why in part it has underperformed in recent years.
The key is utility. Apparently, these days price is determined by more than just appearance. The use of Palladium and Rhodium in catalytic converters to tackle the emissions crisis is well documented for petrol cars, while Platinum is the winner with the now somewhat blighted diesel space.
Nevertheless, even though it is bottom of the league currently, as electric vehicles become more prevalent, the laggard metal could revive. The fact that Platinum is also a cheaper substitute for Palladium is likely to kick in as a factor increasingly as the latter is more than double the former.
The reason why Rhodium is over three times the value of its main PGM peers is that it is a far better emissions reducer. Its higher efficiency allows for the higher price to be sustained, as does the relatively small quantity used per unit. Given the trend channel this market has been in over the past year, there is a likelihood of a peak north of $7,000/oz in coming months.
Palladium, a more familiar metal to most, has made the headlines with its record-breaking run. It has remained above its 200 day moving averages for over a year, and this bullish situation appears well entrenched. Indeed, while the floor of a rising trend channel from August last year at $1,600, fresh peaks towards $2,000 look to be on the cards.
Gold, has been frustratingly disappointing for a decade leading up to the rally this year towards $1,500. It would be pleasing to think that it has been dragged higher by the overall boost in the PGM’s, rather than something relatively mundane such as interest rate outlook / the US Dollar. The good news technically, from the daily chart of Gold is that the recent pullback leaves it close to this year’s line of support at $1,450. While this holds fresh highs for the latest rally towards $1,650 could be seen early next year.
In the case of Platinum, it could be said given its relative underperformance, the fundamentals indicate there could be a revival. In August there was a revival at the 200 day moving average zone, and the same scenario of a bounce at this technical feature on the daily chart appears probable. A 2019 resistance line projection to $1,050 makes for an attainable 3-4 months target, while the $850 uptrend line is held.
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