Analysis
- Platinum remains under pressure after last week’s attempt to reclaim $1,100 stalled.
- The longer-lower shadow on yesterday’s candlestick formation implies dip-buying below $1,050.
- Prices moved below the 100 DMA at $1,059 yesterday, which is providing immediate resistance. Platinum has also formed a DTL, currently at $1,064, formed by early-August highs.
- Further support is seen at $1,047, the 38.2% Fibo of the June-August rally from $956 to $1,195.
- The stochastics suggest prices are attempting to stabilise; additional support is seen below at $1,021 from the medium-term UTL formed by the December/April lows.
- $1,000 marks the 50% Fibo of this year’s rally.
- While the underlying fundamentals are supportive, the failure to breach overhanging DTL resistance formed by the highs in 2013/14 has yet to signal bullishness in longer-term price sentiment.
Macro factors
Speculation surrounding US monetary policy has continued after Fed hawks and doves were both speaking yesterday. But today marks the start of the media blackout period ahead of the FOMC meeting next week, suggesting direction will be led more by market positioning than Fed commentary. The CME Fedwatch tool currently implies on a 15-percent probability of the Fed raising rates in September, down from 24 percent ahead of the August payrolls reading. Meanwhile, the Fed fund rates imply a 45-percent probability the Fed moving in December, up from 42 percent ahead of the jobs data, supporting our expectations for a December increase.
The global platinum market will record a deeper 520,000-ounce deficit in 2016, according to the latest Platinum Investment Council forecast – deeper than the 455,000-ounce deficit it projected previously. It sees total supply falling two percent to 7.73 million ounces – the WPIC lowered its expectations for mine production while trimming its predicted recycling level due to subdued autocatalyst and jewellery scrap sales. It also sees demand edging up to 8.25 million ounces – firmer jewellery and investment demand will offset slower demand from industrial applications, owing to slower usage from the petrochemical sector. Autocatalyst demand is seen slowing marginally – falling market share for diesel vehicles in Europe will negate overall growth in vehicle sales globally.
Impala Platinum reported a loss of 70 million rand in the year ending June 30 compared with a loss of 3.66 billion rand for the previous year. “Our proactive response plan to the lower PGM price environment, introduced in February 2015, has shown positive results during the year as we continued to prioritise shorter-term cash preservation and profitability enhancement measures,” CEO Terence Goodlace said.
ETF holdings have slipped to 2.22 million ounces amid stale liquidation from South African investors. Holdings have fallen around 100,000 ounces in the year to date, which does little to signal a bullish stance among investors.
The net length among Nymex funds/CTAs fell a further 3,551 contracts last week to 45,061 contracts as speculators liquidated 3,868 contract of gross longs while covering a further 685 of open short contracts.
AMCU, the largest union in the South African platinum industry, will meet with Amplats, Implats and Lonmin to try to resolve the deadlock in wage talks. Negotiations are likely to last three to four weeks. Failure to broke a deal would result in a government mediation before a possible strike notice. Given the determination of unions and workers to fight for what they want, the probability of a prolonged strike is higher than the market seems to think.
Rising auto sales continue to support underlying PGM demand. Chinese passenger-vehicle sales rose 24 percent year-on-year in August, according to the CAAM (China Association of Automobile Manufacturers). Sales stand up by 12.8 percent on January-August 2015. Passenger vehicle sales in Europe were up 9.4 percent in January-June. But the latest US figures show signs of fatigue, with sales up only 0.6 percent year-on-year in the first eight months. Figures also indicate a further slippage in diesel vehicle sales following various emissions scandals.
Amplats reported refined platinum production of 748,000 ounces in the April-June period, up 33 percent year-on-year and also more than double the first-quarter volume, when a planned stock-take and safety stoppages took place. The company maintains full-year production guidance of 2.3–2.4 million ounces (metal in concentrate).
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