Platinum’s (Likely) $1,500 Top and Its Implications

USD Holds the Line

The USD Index continues to verify its breakout, and while gold and silver moved a bit higher today, it doesn’t change anything as the USD Index remains clearly above the previously broken support levels. My gold price forecast for July remains up-to-date.

This is a post-breakout breather – a completely normal phenomenon. Something preceding another wave up – the market is simply gathering (emotional) strength to rally once again. Quoting my June 26 analysis:

“The long-term support is very strong and can push the price back any day or hour now. We’re very close to USD’s monthly turning point, so it’s even more likely.”

That’s exactly what happened – the USD Index reversed precisely at its monthly turning point.

And now, with each day with USD above the declining support line, and GDXJ below its rising support line, the case for higher USD Index and lower GDXJ values becomes stronger (and it’s already been strong).

Having said that, let’s focus on what’s really turning heads today – platinum’s strength (“strength”).

Platinum has been moving higher and today; it topped slightly above the all-important $1,500 level. This is a very round number, and those numbers tend to provide psychological resistance. This is not the main reason due to which platinum is likely to reverse shortly, though.

The main reason is what is what I already covered in the previous analyses – the analogies to other times when platinum rallied as much as it did last month without a good fundamental reason.

Before featuring the long-term chart, I’d like to show you something new that serves as yet another confirmation that the time for this rally is up. It also tells us how significant the upcoming decline could be.

You see, what’s truly remarkable about this rally is not just its size (that too) – it’s the fact that platinum is now moving higher while the open interest is declining! Long- and short- positions are being closed. People’s interest in this market is waning despite higher prices.

It is very rare when we see something like that – higher interest in a given market generally moves in tune with the price. As something becomes more valuable, more people are interested. Not this time.

I was looking back for recent cases when we saw something similar in platinum, and I couldn’t find anything. Nothing like that happened previously this year. Or in 2024. Or in 2023. Not even in 2022 or 2021. We haven’t seen it during the previous decade (!) either.

The most recent case when we saw a sizable upswing with a sizable decline in the open interest was in… 2008!

The upswing that followed was the final part of the rally and it was then followed by a HUGE slide. A decline that cut platinum’s price in half compared to the level it reached during the top in the open interest – and much more if we took the price top as the starting point.

$600 Platinum? History Says It’s Possible

Applying the same to the current prices would imply a slide in platinum to about $600. Can it happen? Of course it can happen. The market is extremely overvalued on a short-term basis, and the rally in the USD Index is most likely just starting.

Back in 2008, there was a 2-month delay between the peak open interest and the price top, and right now we are one month after the peak open interest. Do we have to wait for another month? Absolutely not – the history tends to rhyme instead of repeating itself, and the delay right now seems “close enough”.

Besides, we already have a similarly between those cases in terms of how much the open interest declined (about half from the top) and how much platinum rallied after the open interest peaked – not doubling the rally but increasing its size by more than one third. The fact that platinum just reached its psychologically-important $1,500 level while the USD Index is consolidating after a breakout might be exactly what this market needed to turn around.

And yes, this has consequences also for silver, gold, and mining stocks. And copper too. Back in 2008 they all declined together in a profound manner (especially silver, copper, and miners) and I think that we’re going to see something similar in the following months.

Finally, here’s the long-term analogy in platinum after similarly big monthly rallies.

Clearly, the recent sharp upswing is not how the rallies used to start – it’s how they used to end.

All in all, we have very good reasons to expect the USD Index to move higher – much higher – from here. And we a very good reason to expect platinum – and other precious metals and mining stocks – to move lower. If you’ve been considering making money on this decline – this might serve as a sign that the time to enter positions is running out. For more details, I invite you to subscribe to my Gold Trading Alerts.

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Thank you.

Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief