04-16-2019: July Platinum: Looking Too Far Ahead Toward Fuel Cell Vehicles

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calendar Spread

Level Table
Other Factors
Recommendation

4

3     01

1     2

6     75


Introduction

Catalytic converters are the main use for platinum. It is considered more of an industrial metal than an investment vehicle, at least until recently, when its status as "rarer than gold" and cheaper price per ounce than gold led some to think fundamentals declare it is a "bargain." But with climate change and other considerations, there has been a shift away from diesel powered vehicles where platinum's use in converters shines and toward electric vehicles where platinum is not used. Looking much farther out toward 2030, many see the world shifting to fuel cell powered vehicles, where again platinum would be used in preference to palladium and it would begin to shine again. But that is way too far to affect the current platinum supply situation where inventories exceed demand. Yes, it is cheaper than palladium and equally gooid for catalytic converters, but auto manufacturers see a potential supply disruption for platinum and don't want to get stuck withi that, so remain favoring palladium even though it costs more.


Intermarket Analysis

We fed Platinum, Palladium, and the U.S. Dollar Index into a neural network to get the following result:




Parabolic Chart

July Platinum:

Parabolic Chart


Nirvana Chart

July Platinum::

Initial Chart


News Analysis

Total platinum derivative holdings reached an all-time high at 2.517 million ounces. Slightly positive views are flowing toward the overall Chinese economy. There are also ongoing power problems in the South African economy. There is a potential supply threat as labor disruption fears are rekindling give recent price appreciation that could spark wage increase hopes. The palladium market appears to have lost its leadership role to platinum and its supply threats have diminished from headlines.

Ever since platinum prices plunged well below gold prices in 2014, some analysts have argued that platinium is due for a rebound. This was based upon a view that platinum is more rare and should command a higher price than gold. But platinum is an industrial metal unlike gold so that the fact that it was relatively cheap wasn't enough to make its price rise. Until recently, platinum continued to drop, gold traded sideways, and palladium tripled in price.

Demand for platinum and palladium is mostly for use in catalytic converters in cars and trucks, with both working equally on the exhaust of gasoline engines. However, platinum works better at the higher operating temperatures of diesel engines. When the Volkswagen emissions scandal broke in 2015, it changed demand trends for car engines. Consumers shifted away from diesel toward gas, some say permanently. Others say diesel's share of the auto market is stabilizing. Auto makers have been slow to switch to palladium, even though it had been much cheaper since 2001. They tried that before in the late 1990's when, as now, most of the world's palladium came from Russia. After a switch to palladium, Russian supply was disrupted, and palladium prices soared. Car makers then switched back to platinum. The price gap between the two metals widened as carmakers, once bitten, were twice shy. But then China saw increasingly wealthy people buying more and more cars there. They preferred gas-powered cars over diesel. They opted for the cheaper metal palladium at that time, and weren't afraid of doing business with Russia. Given that it rose so much in price, palladium now appears to have peaked while platinum makes a come-back.

Recent data does not show car-makers switching back to platinum despite all the above considerations. Palladium remains in a supply deficit while platinum faces a supply surplus. Norisk, the world's largest palladium producer says the palldium deficit will increase from 600,000 ounces in 2018 to 800,000 in 2019. At the same time, platimum surplus will increase from 400,000 ounces in 2018 to 800,000 ounces in 2019. Platinum miners in South Africa are warehousing the stuff because they don't want to flood the market. Even if car makers switch to platinum, it will take a while for this to show up in prices, perhaps well into 2020. Or China may stick with palladium until they go electric. Prices for platinum may never recover market share before electric cars displace both diesel and gas cars. The above opinions bode poorly for platinum, and Kitco Metals suggests platinum prices may again weaken.

China however is committed to developing a platinum-based fuel cell electric vehicle, targeting one million vehicles on its roads by 2030. China is shifting subsidies away from battery electric vehicles and toward fuel cell electric vehicles, and developing the country's hydrogen refuelling infrastructure. This was proposed under the Schwarzenegger "hydrogen highways" proposition in California, but it never really took off in this country.

Fuel cells are a very important future demand source for platinum. In a platinum-based hydrogen fuel cell, hydrogen and oxygen are combined to generate electricity, with heat and water as the only by-products. Molecules of hydrogen and oxygen react and combine using a proton exchange membrane which is coated with a platinum catalyst. Platinum is especially suited as a fuel cell catalyst as it enables the hydrogen and oxygen reactions to take place at an optimal rate while being stale enough to withstand the high electrical current density and complex chemical environment within a fuel cell, performing efficiently over the long term. China's plans alone would cumulatively require 320,000 ounces of platinum by 2030.

Prices for platinum have gained as expectations for tough wage negotiations this year in top producer South Africa raised the threat of supply disruptions. Anglo American Platiinum's chief executive officer, Chris Griffith, said he's not expecting a long distruption from labor negotiations. Platinum's cheapeness relative to other precious metals is also prompting a second look by investors. The fundamentals are not as negative as perceived and platinum has been beaten up too much and become too cheap.

Platinum bulls reached a head in late March but the net-long position has pulled back somewhat in recent data.

Hydrogen and platinum are near the center of a climate-change solution to which China, if not the U.S., is committed. The electric car market in China is said to be worth $18 billion (U.S.) in startup business investments there. There are at least four big car manufacturers in China with names sounding unfamilar to U.S. customers, comprising parts of this investment. The investment could allow a manufacturing capacity of 3.9 million vehicles per year. China recently reduced subsidies from $7,500 per vehicle to something closer to half of that. There is pressure from a swarm of global giants to push out smaller startup companies.

Zimbabwe and Russia signed a $4 billion in new infrastructure platinum mine deal, helping Zimbabwe's economy which has been stalled since 2014. The deal involves Great Dyke Investment, a company jointly owned by a Russian state-copntrolled company and Zimbabwe's government. Egypt-based Afreximbank may raise $2 billion more to finance building a new mine and smelter at the same project site. This would compete with Impala Platinum Holdings, Ltd., and Anglo American Platinum Ltd., which also own mines in Zimbabwe.

Platinum's future overall is starting to look brighter, but it is difficult to assess how soon optimistic news will affect platinum prices, with some indicating later rather than sooner. Add to this a number of analysts working for mining companies who believe the current optimism for platinum may not be reflected in increased demand soon, and also a supply glut forcing So African mining companies to withhold inventory from market to prop up prices and we may have an overall negative picture still.


Point & Figure Chart

127.0|                                                                  T  4/12
     | NYM - Jul-19 Platinum, 50 troy oz., $/oz.   Cm.=0.06  Lim.= 4.8
     |                       X
     |                     X XO
     |                     XOXO
122.0|_____________________XOXO________________________________________________
     |                     XO O
     |                     X  O
     |                     X  O
     |                     X  O
117.0|_____________________X__O________________________________________________
     |                     X  OX
     |                     X  OXO
     |                 X   X  OXO
     |                 XO  X  OXO
112.0|_________________XO__X__OXO______________________________________________
     |                 XO  X  O OX
     |                 XO  X    OXO
     |               X XO  X    OXO
     |               XOXO  X    OXO          X
107.0|_X_____________XOXOX_X____O_O__________XO________________________________
     | XO            XO OXOX      OX         XO
     | XO      X     X  OXOX      OXO        XO      X   X
     | XO      XOX   X  OXOX      OXO      X XO      XO  XOX
     | XO      XOXOX X  OXOX      OXO    X XOXO      XO  XOXO
102.0|_XO______XOXOXOX__O_O_______OXO____XOXOXO__X___XO__XOXO__________________
     | XO    X XO OXOX            OXO    XOXO OX XO  XO  XOXO
     | XO    XOX  O O             OXO    XO   OXOXOX XO  XO O
     | XO    XOX                  OXOX   X    OXOXOXOXO  X  O
     | XO    XOX                  O OXO  X    O O OXOXOX X  O
 97.0|_XO____XO_____________________OXOX_X________OXOXOXOX__OX_________________
     |  O    X                      OXOXOX        OXOXOXOX  OXO
     |O O    X                      O OXOX        OXOXOXOX  OXO
     |  O  X X                        O O         O OXO OX  O O
     |  OX XOX                                      O   OX    O
 92.0|__OXOXOX__________________________________________OX____O________________
     |  OXOXOX                                          O     O              X
     |  OXOXOX                                                O              X
     |  OXO OX                                                O              X
     |  O   OX                                                O    X         X
 87.0|______OX________________________________________________OX___XO____X_X_X_
     |      O                                                 OXO  XO    XOXOX
     |                                                        OXOX XO    XOXOX
     |                                                        OXOXOXO    XOXO
     |                                                        OXOXOXOX X XOX
 82.0|________________________________________________________O_O_OXOXOXOXO____
     |                                                            OXOXOXOX
     |                                                            OXO O OX
     |                                                            OX    O
     |                                                            O
 77.0|_________________________________________________________________________
     |
     |
     |
     |
 72.0|----|----|----|----|----|----|----|----|----|----|----|----|----|----|---
      111111                       111111              111          1
      001222112333344444566688899990122221111233444567902222344777881112223334
      000001122011200122001201100222100120122002112111110101012012121020110120
      172486152417411158974950169186069633947121036637335965195364314721196984
The above chart is giving a conventional buy signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical low and a seasonal down period.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "WilderRT," but it is giving a no opinion signal (not always in the market). The next best is "Zondr" which is giving a sell signal.

Internal Printout 1 Internal Printout 2 Internal Printout 2

Results of "Zondr" for Platinum (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results


Third System Confirmation

Our third system has triggered a sell signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $50. Initial margin on a single contract is $1,650. Use of options is advised where obtainable.


Historic Range

Scale trade buyers are entering the market for the long term in this price range.

Historical Chart


Commitment of Traders

Commitment 1

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-long.

Commitment 2

Interpretation of a Different Site Below (Their trader categories vary from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that an uptrend remains intact from the last volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) Platinium January 840 Put and Sell (1) Platinum October 850 Put @ 0.40 to the buyi side or less.


o 1 o 2 o 5


Calendar Spread

What the Jul. - Oct. calendar spread suggests to us is that buying the near contract and selling the far one is at most times not profitable, which we think is a sign that these futures may go down in the long run. The best time to enter or leave the above spread is when it is at -3.50 or narrower buying the far as prices are rising and then selling the near, and exiting or entering when it is at -8.00 or wider selling the far as prices are falling and then buying the near. At this time, we appear to be headed toward the buy the far, sell the near point.





Level Table:

Level Table

Allthough a bit difficult to call, we think the path of least resistance is still down.
101.0|                                                                  R  4/12
 NYM - Jul-19 Platinum, 50 troy oz., $/oz.   Cm.=0.06  Lim.= 4.8
     |
     |
     |
 98.5|_________________________________________________________________________
     |
     |A
     |AA
     |AA
 96.0|AAA______________________________________________________________________
     |AAA
     |AAAAB
     |AAABBB
     |AAABB
 93.5|AAAABBBBD________________________________________________________________
     |AAABBBBCCCCDDDDDDE
     |ABBBCCCCCCDDDDDDDDEE
     |BBBBCCCCCCCDDDDDDDEEE
     |BBBCCDEEZ
 91.0|CCCCEEZZ_________________________________________________________________
     |CCCEEEZZZZ[
     |CCEEZZZ[[
     |EEEZZZZ[[
     |EEEEEEPZZZ[   <<<
 88.5|EEEEEFPPPPPZ_____________________________________________________________
     |EEEEFPPPPPXZ
     |FFFPPPWXXYZ
     |FFFFFFOPWXXYYZZ
     |FFFFFOPPQQWWXXYYYYZZ
 86.0|FFFFFFFFGGGHNOPPQQQQQWWXYYYYYYZZ_________________________________________
     |FFFFFFGGGGHHHJNNNNOPPPQQQQQQQWWXYYYYYYZZZZ
     |FFFFGGGGGHHHHHHJNNNOOOOOPPPQQQWXXYYYZZZZZ
     |FFFGGGGGGHHHHHHHHHHJJLMMMMMMNNNOOOOOOOOOPPQQWXXYYYZZZZ
     |FFGGGGGHHHHHHHHHHJJLLMMMMMMMMNNNOOOOOOPQQWXXXXYYYZ
 83.5|FFGGGHHHJLLMMMMMMNNNNNOOOOQQTVWWXXXYYYZ__________________________________
     |FFGGGHHJLLMMMMNNNOOQQQTTTTTVVWWWXXXYYY
     |FFGGGJLLLMMMNNQQTTTTTTVVVVVVWWXXY
     |FGGGJJKLLLLMMQRTTUUUVVVVWXXX
     |FGJJJKKLLLLQRRRRTTTUUUUUVWXX
 81.0|GJJJJJKKKKKLLLLLQRRRRRRSSTTTUUUUVVWW_____________________________________
     |JJJJJKKKKKKKKLLLLLRRRRRSSSSSSSSTTTTTUUUUUUUVVW
     |JJJJJJKKKKKKKKKLLLLRRRRRRRSSSSSSSSSSTTTUUUVVVW
     |JJJKKKKKLLLLRRRRRRSSSSSSTUUUVVWW
     |JJJKKKKLLRRRTUVVWWW
 78.5|JJJKKW___________________________________________________________________
     |JJK
     |JJ
     |JJ
     |
 76.0|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO= 0.204
                               1 1 1 1 1 1                            
       4 5 5 5 6 6 7 7 8 8 9 9 0 0 1 1 2 2 1 1 1 2 2 3 3 4           4
       1 0 1 3 1 2 1 2 0 2 0 2 0 1 0 1 0 1 0 1 3 1 2 1 2 1           1
       8 1 5 0 3 7 2 6 9 3 7 1 5 9 2 6 3 7 2 6 0 3 8 4 8 1           2


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 4/15 ).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

                   PLN9    July Platinum

                      High Price:  935.7
                   Current Price:  898.5
                       Low Price:  822.6

                            Risk: -0.085
                     Opportunity: -0.173

                    (O/R) Ratio =  2.040


Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis - 1
Parabolic Chart + 1
Nirvana Chart - 1
News - 1
Point & Figure + 1
Cyclicals - 1
Seasonals - 1
Internal System 1 0
Internal System 2 - 1
Third System - 1
Historic Range + 1
Commitment of Traders + 1
Range/Volatility + 1
Level Table - 1
Other Factors + 1
Total - 2
Place 9 July Platinum on a Sell Watch with stoploss @ +3.54 above the get-in point when recent price is represented as "89.85".
____________________________________________________________________________________________________________________________________________G.S.