Expert Shares 'Horribly Undervalued' Metal
Technical Analyst Clive Maund shares his view on platinum, a metal he believes is horribly undervalued.
This morning, we are going to have a look at platinum because it is still horribly undervalued and historically extremely undervalued relative to gold, as we will see. In case you didn't know, platinum is a precious metal and it is 30 times more rare than gold.
If all the platinum ever mined were melted and poured into an Olympic-sized pool, the platinum would barely reach your ankles. Gold, however, would fill three pools. So, in a world drowning in worthless paper money, it is very clear that there is going to be a flight into all precious metals. This is already happening with gold and silver, and it will soon spread to other metals, especially super-rare platinum.
On its 20-year chart, we can see that platinum has put in an awful performance since its 2008 peak. It got to over $2200 early in 2008 and is now trading at well under $1000, and if you take continuous inflation into account during all the intervening years, it is clear that, in real terms, it is now trading at a dismally low price.
While it's true that we have taken a freak peak at the top of a "stalagmite top" as our starting point, we can see that, essentially, it has been in a grueling bear market from that peak right through to the Covid Crash low in the Spring of 2020 when a deliberately orchestrated global mass psychosis saw many commodities such as oil "drop through the floor."
The big picture, though, is that it has been marking out a giant base pattern since 2015, a giant base pattern that can be classified as a Head-and-Shoulders bottom.
The 10-year chart enables us to view the Head-and-shoulders bottom more comfortably, and there are several interesting points to observe in this chart. The first is that the price is still relatively close to the band of strong support at the lower boundary of the pattern, roughly between $760 and $840 as mentioned above, the freak Covid Crash drop in the Spring of 2020 can and should be ignored.
This means that it is still at a very good price as its anticipated major bullmarket hasn't even started yet and it hasn't even started to start, although we are seeing the first stirrings. The next related point is that it will break out this base pattern and really get moving once it has succeeded in breaking above the zone of resistance, marking its upper boundary, which is roughly $1300 - $1400. Lastly, although the Accumulation line is still rather weak, there has been a noticeable buildup in volume in recent weeks, which is believed to be the precursor to a rally.
Zooming in on recent action now via the 6-month chart, we see that platinum has at last started to respond to gold and silver's emerging bull market as it rose sharply about a week ago and it is encouraging to see that its 200-day moving average has already turned up so that if platinum now continues to advance or even if it only holds its ground, we should soon see a bullish cross of the moving averages which will set it up for a major new bull market.
Lastly, just to emphasize just how cheap platinum is, we will look at the 20-year chart of its price relative to the price of gold. This is a really rather astounding chart as it shows that platinum is at about one-fifth of its price relative to gold compared to where prices were back in the mid-2000s, and given that the downtrend channel shown that has been in force from 2010 is converging, it implies that we could see an upside breakout by platinum relative to gold before much longer that would lead to a long period of outperformance by platinum, and also given that we know where gold is headed, the gains made by platinum could be spectacular.
The conclusion must be that this is an excellent time to buy platinum and platinum-related investments. So, we will be on the lookout for better platinum stocks going forward.
Platinum spot price up 2.2% at $1,005 on the morning of April 12, 2024.
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Clivemaund.com Disclosures
The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks cannot be only be construed as a recommendation or solicitation to buy and sell securities.