Platinum testing key short-term support :: Business Line

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Gold prices have declined by 17 per cent year to date and silver prices have plunged 27 per cent so far this year in expectation of the quantitative easing programme ending sooner than expected. US interest rates might climb higher and supply might increase. In the same period, platinum prices have fallen 6 per cent. But, this week, gold and silver prices have marginally ended on a positive note while platinum has dropped 3.6 per cent to close at $1,445 a ounce.

LONG-TERM VIEW

Platinum has been on a long-term uptrend since bottoming out in October 2008 at $732. Within this uptrend, the metal has been trading sideways in wide trading range between $1,375 and $1,730 since September 2011. A strong reversal from the lower boundary at $1,375 can see the metal trending higher and testing its upper boundary at $1,730 in the ensuing months.

To restore the bullish momentum, the metal needs to emphatically breakthrough the upper boundary of its sideways consolidation range at $1,730 level.

In that scenario, it can trend higher to $1,900 and then to $2,000 levels in the long-term.

Conversely, strong close below the lower boundary at $1,375 can pull the metal price down to its subsequent key long-term support positioned in the band between $1,300 and $1,330. As long as this support band holds, the metal remains in a long-term uptrend. Decisive fall below this support level will mar the long-term uptrend and pull the metal price down to $1,200 in the long-term.

Since September 2011, platinum has been on sideways consolidation phase in a broad range between $1,375 and $1,730. After encountering resistance at the upper boundary of $1,730 in February 2013, the metal price changed direction triggered by negative divergence in daily indicators. Since then, it has been on a medium-term downtrend. While trending down, the metal breached its key support as well as 200-day moving average at around $1,550 during early April this year. This week’s decline has breached its 21 and 50-day moving averages.

Platinum is currently testing its short-term support at around $1,450. Both the daily and weekly relative strength index are on the brink of entering the bearish zone from the neutral region. Whereas, the daily moving average convergence divergence indicator has re-entered the negative territory from the positive territory showing signs of bearishness. The weekly MACD is featuring in the negative territory implying downward momentum. Strong decline below the current support will pull the metal price down to $1,400 or $1,375.

However, the metal can rebound from its significant long-term support level at $1,375 levels as it has reversed from this level on few occasions previously. On the upside, the metal has important resistance at $1,550. A conclusive jump above this level will alter its medium-term downtrend and take the metal price higher to $1,630 and to $ 1,730 in the medium-term.

But, inability to trend higher can weaken the metal further and it can head lower to $1,300 .