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

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Introduction

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.

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Parabolic Chart

July Platinum:

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Nirvana Chart

July Platinum:

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News Analysis

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.

235.0I                                                                  T  4/ 2
     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.

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Cyclical and Seasonal Factors

We are headed toward a cyclical high and a seasonal up period.

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Internal Program

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.)

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Third System Confirmation

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.)

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Margin

The point value is $50. Initial margin on a single contract is $8,100 Use of options is not possible.

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Historic Range

Scale trade sellers are entering the market for the long term.

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Commitment of Traders

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.

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Volatility / Probable Range

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

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Possible Future Prices

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Option Recommendation

We could find no options for this commodity.

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Other Factors

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

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Level Table: The path of least resistance is up.

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Overall Recommendation