10-23-2011: January Platinum: Labor Disputes Insufficient to Quell Current Supply
Threre a number of supply disruptions, particularly in South Africa, the world's #1 producer, over labor disputes. Still, other news such as Russia's plans to release stockpiles and the direction of the general global economy seems to provide some support for lower prices. Overall, we think fundamentally platinum should still be moving higher, but the technical indicators say otherwise. Signals in general are very conflicting, some say up, some say down, but we think they narrowly favor down.
We fed platinum, palladium, and gold into the neural network to get the following result:
January Platinum:
January Platinum:
Black-owned Roayl Bafokeng Platinum said a strike over wages could negatively impact production if not settled soon. The National Union of Mineworkers employed by JIC Mining services, one of the largest mining contractors in South Africa, have been on stike since October 17th. The firm reported half-year platinum group metals production of 142,100 oz. In other So. African production news, production resumed at Aquarius Platinum's Everest mine foillowing an agreeent between the Assocition of Mining and Construction Unions and contractor Murray & Robers Cementation. Anglo American Platinum, the world's largest primary platinum producer which accounts for 40% of world output, said production rose 12% in the third quarter of 2011 over the previous 3-month period. The rise was due mainly to the ramp-up of two new sites to more than offset the impact of safety-related work stoppages. Refined plaltinum production decreased to 647,000 oz., down 7% last year from the previous year. Russia is considering exporting the last 9 tonnes oif palladium it has in existing stocks between 2012 and 2013. Modern fuel cells use a solid proton exchange membrane as the electrolyte with a platinum catalyst on either side. These are used in fuel cell vehicles to which Korea seems the most committed. Crown Equipment Corp. heralds is 500th forklift built to be powered with a fuel cell. An autoshow event in Paris sponsered by Air Liquide featured fuel cell vehicles including the "Fuel Cell Black Cab" as a shining example of British ingenuity. Due to demands of the Zimbabwe Governmenmt, Impala Platinum has agreed to hand over a 7% stake in its Aimbabwe unit to local investors. Robert Mugabe's government wants all foreign-owned firms to sell a 51% equity stake to local balck investors, and has been putting pressure on the mining industry recently. Help is needed from Impala to raise its Zimbabwe mines production there to 360,000 oz./year of platinum. Northam Platinum Ltd. is also having labor problems with workers demanding an overall wage increase of 20% for semi-skilled workers compared to the company's offer of 5.8%. India's government has put pressure on its citizens to scrap all cars made before 1996. A road tax and premiums on vehicle insurance there get progressively larger with vehicle age. A 15-year cutoff is sought to help sales of new vehicles in India, which is influenced by the Society of Indian Automobile Mfrs., not necessarily to improve air pollution. Sylvania Platinum reported a 12% increase in production over the previous quarter of platinum to 13,089 oz. In general trading of precious metals, a falling U.S. Dollar recently has boosted interest in precious metals once again and sent commodity prices soaring higher at times. A recent sharp fall in gold prices has caused that metal to lose some of its safe-haven desirability. Stillwater Mining, the only U.S.-producer of platinum, reported smoke at its mines. In two recent occurrences, evacuation procedures went into effect. The Federal Mine Safety organization is investigating. Equipment has been removed for inspection curtailing some production. The bulk of this news suggests production problems may have a short-term effect on boosting platinum-group metals prices.
199.0I T 10/21
I NYM - Jan-12 Platinum, 50 troy oz., $/oz. Cm.=0.06 Lim.= 5.4
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The above point-and-figure chart is giving a conventional sell signal.
We are headed toward a cyclical low and a seasonal up period.
Our best-performing internal program is "Pattern." It is giving a buy signal.
Results of "Pattern" for Platinum (blue lines = successful trades, red, unsuccessful): (Always in the market.)
Our third system has just triggered a buy signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $50. Initial margin on a single contract is $4,950. Use of options is recommended.
Scale traders are not a factor in this price range.
In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Large speculators with the best track record are getting increasingly-short.
The average volatility shown below suggests that a major downtrend remains intact from the last volatility low point.
Our option trade recommendation is to Sell the Platinum April 2300 Call @ 12.50 or better.
What the Jan. - Apr. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go up. The best time to enter or leave the above spread is when it is at +5.60 or narrower buying the far as prices are falling and then selling the near, and exiting or entering when it is at -7.00 or wider sellling the far as prices are rising and then buying the near.
Here's an intraday chart for the previous day ( 10/20 ).
Risk Versus Opportunity Report
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PLF2 January Platinum
High Price: 1631
Current Price: 1523
Low Price: 1299
Risk: -0.147
Opportunity: -0.306
(O/R) Ratio = 2.074
| Factors | Weighted Points |
|---|---|
| Inter-Market Analysis | + 1 |
| Parabolic Chart | - 1 |
| Nirvana Chart | - 1 |
| News | + 1 |
| Point & Figure | - 1 |
| Cyclicals | - 1 |
| Seasonals | + 1 |
| Internal System 1 | + 1 |
| Internal System 2 | 0 |
| Third System | + 1 |
| Historic Range | 0 |
| Commitment of Traders | - 1 |
| Range/Volatility | - 1 |
| Level Table | + 1 |
| Other Factors | - 1 |
| Total | - 1 |
Place 3 January Platinum on a Sell Watch with stoploss @ +7.02 above the get-in point when the current price is represented as "152.31."________________________________________________________________________________________________________________________________G.S.
