Platinum price has moved into a deep bear market as the commodity supercycle ends. Its price has crashed almost 30% from its highest point this year. This performance is also in line with that of other commodities like copper, silver, gold, and palladium.
Why is platinum falling?
Platinum is a leading metal that is used in the manufacture of catalytic converters, which are used in the automotive industry. It is also a precious metal that people hold as a store of value. Therefore, the platinum price is usually influenced by automobile demand and the performance of the US dollar.
Automobile demand has surged in the past few years, which has pushed prices significantly higher. Recently, however, there are signs that the sector is cooling down as inflation pushes vehicle prices to the highest level on record. The sector is also struggling because of the ongoing crisis in Ukraine. As a result, Mercedes Benz said its revenue dropped by more than 15% in the past quarter.
At the same time, many platinum and palladium companies have resumed production as the impact of Covid-19 fades. During Covid, most firms in the industry put in place strict measures to prevent the spread of the disease. Now, they have resumed their operations to take advantage of rising demand.
Platinum price has crashed since Russia’s sanctions have not had an impact on its supply. Many Russian miners are still working and selling their products to China.
Meanwhile, the stronger US dollar has had an impact on prices. The dollar index has surged to the highest point in over 20 years. This is important since platinum is typically traded in US dollars.
Platinum price prediction
In my last note on platinum, I noted that it was on the cusp of a major bearish breakout. Again, I pointed to the head and shoulders pattern that formed.
The daily chart shows that platinum prices have been in a strong bearish trend in the past few months. Along the way, it formed a head and shoulders pattern, which is usually a bearish sign. The price moved below the neckline of this pattern earlier this month. It has also moved below the 25-day and 50-day moving averages.
Therefore, platinum will likely keep falling as sellers target the next key support level at $800. A move above the resistance at $870 will invalidate the bearish view.