04-04-2008: July Platinum: So. African Supply Concerns Help Boost Prices




While a strengthening U.S. stock market and declining oil prices may reduce inflation concerns to a degree, the primary factor affecting platinum in our opinion is a shortage of electricity needed to mine the stuff in South Africa. Eighty percent of the world's supply comes from there. This has given a very strong series of technicals on our various indicators.
July Platinum:

July Platinum:

Oil prices appear to be falling for the moment, and the U.S. Dollar is strengthening as of this writing. This combination is not good for precious metals prices. Recent Federal Reserve chairman testimony suggests that the Federal Reserve may become more hawkish with regard to interest rates and strengthening the U.S. Dollar further in the near future. Beliefs that the U.S. financial condition is coming under control are also pressuring precious metals markets. The Senate's $15 billion plan to help the housing markets is yet another effort to head off what appears to be an inevitable sustained recession. (We are already in a recession.) For platinum in particular, there are renewed concersn from Zimbabwe regarding a potential tightening of supply. But many analysts believe that platinum at current levels is simply too expensive. South Africa's state utility can't meet electricity demands from precious metals miners. Unless demand drops, power issues will persist for many years according to the Investec State Utility, while South Africa produces 80% of the global platinum supply. Impala Platinum Holdings Ltd., the world's second-largest platinum producer, may revisit its dividend policy, given the current high prices for the metal according to a company spokesman. There is some concern about declining demand for industrial uses for precious metals in the U.S. during an economic downturn. Eastern Platinum Ltd. of Vancouver, B.C., reported a $0.02/share quarterly loss for the quarter ending December. Average price sales per ounce were at $1,305, compared to $992 in 2006. Results were aided by an 8% increase in the value of the So. African Rand in relation to the U.S. Dollar. The company believes it still has 100 million ounces of platinum in geologic reserves in its South African properties. We consider the African supply situation more critical than the U.S. economic and crude oil factors.
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I NYM - Jul-08 Platinum, 50 troy oz., $/oz. Cm.=0.06 Lim.= 1.2
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The above point-and-figure chart is giving a conventional sell signal.
We are headed toward a cyclical high and a seasonal up period.

Our best-performing internal program is "Wilderrt." It is giving a sell signal.
Results of "Wilderrt" for Platinum (blue lines = successful trades, red, unsuccessful): (Not always in the market.)
Our third system has triggered a buy signal. (Note, disregard the year date 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 $8,100 Use of options is not possible.
Scale trade sellers are entering the market for the long term.
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. Red is small speculators. Green is large speculators. Blue is commercials. Commercials with the best track record are getting increasingly-long.

The average volatility shown below suggests that the uptrend remains intact from a previous volatility low point.


We could find no options for this commodity.


Here's an intraday chart for the previous day ( 4/02 ).

Level Table:

| Factors | Weighted Points |
|---|---|
| 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 |
| Commitment of Traders | + 1 |
| Historic Range | - 1 |
| Range/Volatility | + 1 |
| Level Table | + 1 |
| Other Factors | + 1 |
| Total | + 7 |
Place 1 July Platinum on a Buy Watch with stoploss @ -21.50 below the get-in point.________________________________________________________________________________________________________G.S.