Platinum is still in the spotlight, and the analogies just keep coming.
In yesterday’s analysis, I focused on the surprising (to many) implications of platinum’s outperformance, and today, I’d like to provide you with an update.
Let’s start with a quote from yesterday’s analysis:
Platinum price is up sharply today after rallying sharply also last week. All this while the volume is huge and the open interest on the futures market is also very significant.
When did this happen in the previous years? There two times when we saw all three align in the similar way and one of them is more similar than the other. The key analogy is to the early 2020 top – that’s when we saw THE top that preceded THE slide.
The second most-important analogy is to the late-2019 top, before the above-mentioned top. The open interest was not as big, and the rally was also not that huge.
Still, declines follow shortly in both cases.
The remaining two cases are where we have similarity in terms of price moves (after sharp rallies) and in terms of volume (it spiked), but not in terms of the open interest. Platinum declined after both times, anyway.
(…)
What’s remarkable is that the times when platinum soared on a short-term basis, were also the times when silver topped.
In most cases gold topped as well, but the “platinum sign” was particularly useful in case of silver – its big sister metal.
All this remains up-to-date, however, in reality the importance of this signal and its strength is even greater than that.
Let’s zoom out.
The above chart features platinum’s price over the past 20 years, and it’s based on weekly candlesticks.
The upper part of the chart features the Rate of Change indicator, which I used to compare moments where we saw similar momentum in platinum.
It turns out that there were only nine of such cases in the recent past, and a few of them are not really analogous.
The anomalies are:
- The rally that immediately followed the 2008 bottom in many markets
- The rally that immediately followed the 2020 bottom in many markets
The reason is simple – we are not after a major bottom in many markets at this time.
This leaves us with six cases:
- The 2006 top in gold and silver
- The 2008 top in gold and silver
- The early 2012 top in gold and silver
- The late 2012 top in gold and silver
- The 2023 top in gold and silver
- The 2024 top in silver (and less notable top in gold)
The pattern is crystal clear.
This kind of strength in platinum implies that a top is almost certainly (there are no certainties in any market) in the case of silver, and very likely the same is the case also for gold.
Speaking of gold, the platinum to gold ratio has fewer analogies, but the key one is remarkable.
The platinum to gold ratio rallied sharply, and there was only one really similar case in the past twenty years and that was the 2008 top. The other two similar times were after the key multi-market bottoms.
Remember how everyone was caught by surprise with the 2008 slide? It seems that we’ll have something very similar this time, even though the writing is on the wall (tariffs’ impact on world trade).
Silver and platinum rallied strongly, but none of those rallies was meant to last. Platinum bottomed below the one third of the value that it had at the 2008 top. Silver and mining stocks declined particularly profoundly at that time as well.
Again, nothing fundamental changed for platinum these days. Nothing changed for palladium, and nothing changed for silver. And definitely, nothing changed for copper.
All those recent price spikes that we saw are all representations of the shift in sentiment – ultra-bullish sentiment that’s exactly what we see at the tops. I know it’s difficult not to be overwhelmed by it, but please look at the charts again – that’s exactly the right thing to do.
Thank you for reading my today’s analysis – I appreciate that you took the time to dig deeper and that you read the entire piece. If you’d like to get more (and extra details not available to 99% of investors), I invite you to stay updated with our free analyses - sign up for our free gold newsletter now.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief