Platinum price forecast 9 February 2021

2021-02-09

Platinum gave head start to gold. Forecast as of 09.02.2021Dmitri Demidenko

For a long time, platinum has been overshadowed by gold and palladium, but in the fourth quarter of 2020, it was able to mark a better result compared to its competitors and is going to close the gap in 2021. Let us discuss this topic and make up a trading plan.

Fundamental platinum forecast for a year

News of COVID-19 cases decline, and the high chances for Joe Biden’s new fiscal stimulus package to pass through Congress positively impacted the precious metals sector. Gold showed growth on expectations of inflation accelerating concerning a weak US dollar. Platinum has skyrocketed to its highest level since August 2016. This asset is one of my [top favorites in 2021][1], so I am pleased about its success.

Even though in 2020, platinum showed the worst growth (+11%) in the precious metals sector, it was the best (+19%) in the fourth quarter. This was facilitated by the belief in a reflationary environment due to Joe Biden’s victory in the presidential elections and the “blue” wave, as well as a clear underestimation of the asset. It turned out that the Democrats’ victory in the Senate triggered the [XPTUSD][2] correction. Yet when the dollar grows amid disappointment in the speed of vaccination is one thing, and when it falls due to the passage of the COVID-19 seasonal peak is another. Some bear speculators on the greenback lost their nerves and closed their shorts. But without a doubt, new USD traders will come to the market soon.

US dollar and other currencies’ managed money positions

Source: Bloomberg, CFTC.

Platinum positioning is optimal for the continuation of the upward movement. Asset managers’ net long positions are far from the all-time highs at the turn of 2019-2020.

Platinum managed money position

Source: Bloomberg, CFTC.

Currently, the analyzed asset is trading at a discount of $670 and $1170 per ounce compared to gold and palladium, respectively. The maximum premiums were $1,144 and $1,600 in 2008, with discounts of $1,000 and $1,540 in the spring of 2020. Platinum has historically been undervalued compared to its major competitors.

The main drivers of [XPTUSD][2] growth in 2021 will be: increased demand for jewelry in China, increased industrial use of platinum, increased consumer demand for cars, and interest in platinum in the autocatalysts’ field, including in cars running on hydrogen. These factors, along with the underestimation of platinum, favorable positioning in the derivatives market, a weak dollar, and a reflationary environment, will contribute to the platinum rally.

Indeed, in the next few months, the situation that was in the fourth quarter of 2020 may repeat itself. Belief in victory over COVID-19 will facilitate the opening and explosive growth of the world’s major economies, increasing global risk appetite and accelerating inflation. The Fed will continue to adhere to ultra-easy monetary policy, not allowing debt market rates to rise too quickly. Cheap money from the Fed and Congress will push gold up, forcing all other precious metals in the same direction.

Platinum trading plan for a year

Thus, the bullish platinum market environment allows me to maintain an optimistic outlook. [I still expect][3] [XPTUSD][2] to rise to $1200-1235 in the first quarter and to $1330 by the end of 2021. I would suggest buying the platinum.

Price chart of XPTUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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