A platinum opportunity not to miss
By Paul Reid
25 August 2023
When it comes to opening a trading position, many new traders enter the market after a rebound is already well underway, or take a contrary position too early and see losses accumulate while waiting for a reversal.
This unfortunate timing can be stressful and understandably lead to analysis paralysis, and even total trading inaction. But traders with experience will know the even greater pain of a missed opportunity. So when is the right time to commit your equity to an asset? Is there a right time?
The goal of every trader is to find the perfect market opportunity, get in on the action at the optimum price, and get out before profits start diminishing. This sometimes means waiting a while for unique market conditions to come along.
Only when confidence is high and all the signals are green should you put your equity to work. That rare market opportunity may well be forming as we speak.
Looming recession and the haven assets of choice
America’s Federal National Mortgage Association, known as Fannie Mae, and the International Monetary Fund (IMF) are already concerned about signs of a slowing economy. Now, billionaire investor Jeremy Grantham is publicly warning that a recession is coming and that the Fed’s rosy forecast isn’t accurate.
Today’s complicated geopolitics, rising global inflation, constant interest rate hikes, and US dollar uncertainty have left many traders confused, with Exness’ buy/sell sentiment fluctuating around the 50/50 line for many of the popular assets.
But in times of economic uncertainty, a traditional haven for traders is found in metals. One stands out from the crowd: Platinum (XPT).
High platinum demand contrasts low XPT price
Global demand for platinum is rising. According to a report by Statista, the gross global demand for platinum in 2023 is forecast at around 7.5 million ounces. That’s quite an increase from 2022’s global demand estimates of 6.8 million ounces.
Such heightened demand could potentially trigger scarce platinum supplies, consequently boosting the XPT price. Given its current low price range, it would make sense to start buying up platinum supplies while those prices remain low. Some countries have already started.
China has imported over 147 tons of platinum in the last 2 years, establishing a reserve of this already scarce and precious metal. The reported $6.95 billion import is likely motivated by the metal’s many industrial applications, notably in sectors like automotive and electronics. As China's economy and the global electric vehicle (EV) industry continue their expansion, the demand for platinum could easily surge. If platinum demand outweighs supply, a bullish price action might be inevitable.
Platinum’s role in green energy solutions
According to the International Energy Agency (IEA), clean hydrogen is currently enjoying unprecedented political and business momentum, with the number of related policies and projects around the world expanding rapidly.
The IEA concludes that now is the time to scale up technologies and bring down costs to allow hydrogen to become widely used. The interest in hydrogen as an alternative fuel stems from its ability to power fuel cells in zero-emission vehicles, the ease of domestic production and the fuel cell’s fast filling time and high-efficiency performance.
Platinum plays a major role in hydrogen fuel generation and cell storage. For instance, platinum acts as a catalyst in speeding up electrolysis — the process of splitting water into hydrogen and oxygen. The metal also works as a fuel cell catalyst, converting hydrogen into electricity.
From EVs to power generation, platinum has a solid future in a green world, if hydrogen solutions continue to win the hearts of eco-friendly nations.
XPT on the charts
XPT is in a downtrend hovering at the $908 (USD) level, at the time of writing. The slump is no doubt due to the mirroring of a weakened XAU price, which is a common occurrence throughout the metals basket. XAU remains in a downward trend, with speculations that investors shifted to USD bonds to capitalize on favorable USD interest rates, but the XPT price is now showing a slight divergence.
On the XPT chart, the Bollinger Bands are now narrowing. When Bollinger Bands converge, it is said to mean that market volatility is decreasing, and the price is moving into a tighter range. This can indicate that investors are becoming more optimistic about XPT and a big price movement is about to happen. According to John Bollinger, creator of the Bands, periods of low volatility are often followed by high volatility. Therefore, a narrowing of the bands can foreshadow a significant price action.
To support that assumption, the Relative Strength Index (RSI) indicator shows a strong oversold signal, which suggests a coming reversal.
Recessionary fears are on the rise again, promoting haven asset investing. Global demand for rare and precious metals such as platinum is increasing due to growing EV production and other electronics applications. Hydrogen technology is gaining support in the energy industry. And technical tools are indicating an XPT rise. There are lots of reasons to support a bullish XPT forecast.
Right now, USD strength is influencing most metal forecasts, but there are very few reasons to assume that stability is sustainable, and when USD momentum finally breaks, the reaction could be rapid. If you have inactive funds waiting for a worthy asset, XPT could be the opportunity you’ve been waiting for. Be ready to react to the markets without delay, and add XPT to your favorites and watch list.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.
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