Platinum Price H&S Points to More Downside as DXY Index Surges

Summary:
• Platinum price has had a difficult performance this year as investors worry about the economy. It has slipped by more than 25% this year

Platinum price has had a difficult performance this year as investors worry about the global economy. It has slipped by more than 25% this year and by 35% from the highest point in 2021. Palladium price has also crashed by over 40% from its highest point this year. Other metals like gold, silver, and copper have also been under pressure this year.

Strong US dollar and inflation fears

Platinum price has been in a bearish trend this year as concerns about the global economy remained. Industrial production in key countries like the United States, China, and in Europe has been under pressure due to the crisis in Ukraine, Covid, and drought. 

As a result, the US dollar has surged to the highest point in more than two decades as concerns about inflation continued. Data published on Wednesday showed that the headline consumer price index (CPI) rose in August even as gasoline prices dropped. Historically, platinum price has an inverse correlation with the US dollar index (DXY index).

Meanwhile, there are signs of high platinum demand. According to the World Platinum Investment Council (WPIC), China imported so much platinum in the first half of the year, which led to shortages to other countries. This happened amid elevated supply declines from mines and recycling. Russia is a key producer of platinum. 

In another report, WPIC said that the recently-passed Inflation Reduction Act (IRA) and the previous infrastructure package will lead to more demand. That’s because platinum is a key component of many green technologies. 

Platinum price prediction

The daily chart shows that the platinum price formed a head and shoulders pattern this year. In price action analysis, this pattern is usually a bearish sign. It moved below the neckline of this pattern at $906 in July and fell to a low of $825. Platinum then retested this level recently and moved to the 25-day and 50-day moving averages.

Therefore, because of the H&S pattern, there is a likelihood that the metal will resume the bearish trend as sellers target the next key support level at $800. A move above the resistance at $950 will invalidate the bearish view.