The Bullish Case For Platinum and Palladium

platinum11Sasha Cekerevac: I have been in this business a long time, and I believe that the best tactic is to combine as many positive factors as possible in order to have the highest probability of success.


There are essentially three main methods to look at; this includes fundamental analysis, technical analysis, and quantitative models. You don’t need every single category of analysis to be completed; you just need enough evidence from all to indicate whether or not a stock or index will move up or down. Obviously, there is no 100% guarantee, only a level of probability.


Taking a look at the precious metals market, over the past couple of months, there has been an increasing number of signals leading me to conclude that there is a good probability that precious metals will move up in price in 2014.


Two of these precious metals that have gotten me interested are platinum and palladium. The fundamental analysis in these precious metals includes determining the level of demand and supply globally.


The fundamental analysis of supply for these precious metals is quite interesting and sad, as protests and violence are escalating in South Africa. For those unaware, platinum and palladium are primarily extracted from South Africa and Russia. Any disruption in the supply from these regions will cause an adverse price reaction.


So far this year, there are more than 70,000 South African miners on strike who are looking for higher wages. There have been 10 deaths this year by protests demanding better living conditions. With the South African currency continuing to drop, inflation is rising, causing instability in their economy and the political system itself.


Looking at a situation from a fundamental analysis point of view, is it more or less likely that things will get resolved shortly? I think it’s very unlikely, as the political process anywhere takes quite a while. This will continue to create a bullish environment for precious metals, with the supply situation questionable and physical demand remaining strong.


That was a very brief overview of some of the types of things to consider when looking at fundamental analysis for precious metals.


Taking a look at the technical picture, the following chart for platinum shows that a reverse head-and-shoulders pattern is being formed.


Platinum - Spot Price (EOD) Chart


Chart courtesy of www.StockCharts.com


Many precious metals trade off of technical indicators as much as a fundamental analysis point of view.



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