Platinum price has been in a strong bearish trend as investors worry about the extreme hawkish Federal Reserve. The precious metal is trading at $934, which is about 10% below the highest level last week. It is hovering near the lowest level since May. Other key commodities like iron ore, copper, and silver have also retreated.
Platinum is both an industrial and precious metal. Therefore, its price is usually affected by supply and demand dynamics and actions by the Federal Reserve. Last week, the Federal Reserve decided to hike interest rates by 0.75%, and officials warned that similar hikes were coming. As a result, the US dollar strength continued as investors placed bets on a looming recession. As a result, platinum price has an inverse relationship with the US dollar.
Meanwhile, platinum is also falling as investors anticipate a weak automobile market as inflation surges. With the price of most items rising, there are concerns that the red-hot auto market will start cooling down as people focus on staples. But, most importantly, it is reacting to the rising risks of a recession in the US and other countries. A report by WSJ placed the likelihood of a recession in 2022 at 44%, up from 28%.
The daily chart shows that the price of platinum has been in a strong sell-off in the past few months. It has crashed by more than 30% from its highest point in 2021. However, a closer look shows that the price has formed a head and shoulders pattern, whose neckline is at $913. In addition, it has moved below the 25-day and 50-day moving averages.
Therefore, there is a likelihood that platinum price will continue falling in the near term. The sell-off will be confirmed if the metal moves below the neckline of the H&S pattern at $913. A drop below this level will see it drop to as low as $700.
This post was last modified on Jun 21, 2022, 09:13 BST 09:13