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Gold and Platinum - a Tale of Two Cousins

Gold and Platinum - a Tale of Two Cousins

The events of last week in the financial markets did not augur well for 2016 - Chinese equities crashed and the world followed as expected.  The safe haven bounce that we saw in gold was also in line with expectations.   Much has been discussed in the media with a range of opinions being expressed, however not much has been said about gold’s somewhat neglected cousin; platinum.

In the case of gold, it is clear that the $ 1100 round-figure resistance (pink line on the charts below) appears to have held firm. Gold price has declined over the three trading days this week (13/01/2016) with a corresponding rise and/or stabilization of global equities proving once again its counter-cyclical behavior.  From a technical perspective, on the weekly time frame, it would appear that the bearish sentiment is set to continue in 2016.

TWP 1 14 Jan

However, scratch under the surface and things do get a little murky.  The daily chart (below) appears to be displaying the initial signs of an uptrend with the RSI and MACD indicators both directed upwards.  I am not for one moment suggesting that gold has made a massive comeback and is likely to stage the mother of all rallies.  My submission is simply that I would not initiate a position either short or long on gold as at the time of writing.  If gold breaks below the Dec 04 low of $ 1045 (purple line on the charts) I would start looking for short opportunities keeping the $ 1000 round number in perspective.  If this big round number is also breached, then I would start eyeing short entries with a potential target of $ 900.

TWP 2 14 Jan

Platinum is a somewhat different story.  The long term trend is down and the events of last week do not appear to have had a major impact on this metal. Moreover, a Trend Flow trade signal has triggered to the short side this week as the low of last week has been breached. Last week’s candle formed in the sell zone between the 10 and 20 period moving-averages which is a crucial aspect for the Trend Flow strategy.

TWP 3 14 Jan

The daily chart is in the process of rolling over and resuming the longer term downtrend as price has just put in a new lower low (indicated on the chart below) with moving averages rolling over and very close to forming the correct alignment I require for a short setup. The downtrend will be confirmed as soon as a new lower high is formed. We would need to look at the 4 hour chart for some indication as to where this might be.

TWP 4 14 Jan

The 4 hour chart is in fact bearish as price has formed a series of lower lows and lower highs. What I am most interested in however is the cluster of resistance at $ 865 which is formed by the resistance / support structure as well as the 61.8% Fibonacci level. I am watching this level very closely as if price can get up to that level, find resistance and then move lower, that could form the lower high on the daily chart and be the sign I am looking for to seek a short setup. Suitable profit targets would be $840, $800 and $750.

TWP 5 14 Jan

Nilay Guha

Trade With Precision

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