The Platinum price has broken two key support levels and looks likely to head lower. Supply is also set to increase as South African miners return to work as Covid-19 restrictions ease.
Platinum (XPT/USD) has benefited from favourable market conditions this year. The price has been boosted by a weaker dollar, serious supply disruption, commodity index flows and inflation fears.
One of the bullish developments may soon disappear. Platinum mining operations in South Africa should soon return to full capacity as pandemic restrictions ease.
Johnson Matthey expects the upcoming surge in supply to more than offset this year’s rising autocatalyst demand. They also predict the increase in capacity will swing the market from a deficit into a surplus.
We can see that the price has broken down through the lower end of an ascending channel on the daily chart. When the trend line at $1,184 was breached, the Platinum price extended lower to $1,166.50.
The leg lower took the price below the 100-day moving average at $1,205. This technical break has left XPT/USD to wider liquidation.
The platinum price is extremely volatile and, at times, extremely illiquid. Therefore, I expect the market may have a lot more downside from here.
My target is the 200 DMA at $1,055, around 10% lower than the current $1,166.
I would abandon my immediate bearish outlook if the price manages to recover back above the 100 DMA and into the trend channel.
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