Platinum likely to continue outperformance as silver and gold flounder

Platinum weakens amid wider precious metal decline

Platinum is on a rare down day today, with a wider pullback in precious metals driving weakness for this recent outperformer. The sector has been particularly interesting over the past year, with global monetary and fiscal expansion driving upside given the role as an inflation hedge. That driver of interest for the sector is unlikely to go away, with the ‘reflation trade’ expected to fully kick in this year.

The Covid-19 pandemic has been deflationary for the most part, yet this year could see that shift as major stimulus efforts are accompanied by a short rise in commodity (input) prices. The Federal Reserve (Fed) December forecast points towards a significant move back towards the 2% target rate over the course of this year, with many seeing that as a potential reason to get long precious metals.

Fortunately for some of these precious metals, we do not only see them through the lens of a haven or inflation play, with silver and palladium in particular gaining some traction from the wider surge in commodities.

Huge Chinese demand growth in 2020 is likely to continue through this year, with the reopening likely to ramp up that consumption driver for commodities. With that in mind, particular interest lies in the likes of platinum which is expected to benefit from a return to pre-pandemic levels of automotive, jewelry and industrial demand.

Platinum, gold and silver price technical analysis

The chart below highlights why were particularly interested in this asset, with the gold/platinum and silver/platinum both falling sharply over recent months. That platinum outperformance could continue as we move forward, with clear evidence that this is the favoured market of the three of late.

That leads us to the platinum chart itself, with the pullback seen today bringing a potential buying opportunity. The four-hour chart highlights the recent leg higher, with the price falling back into the 61.8% Fibonacci support level.

A break below the $1211 support level negates this current intraday trend, bringing a potential wider retracement of the rise from $1077. Until then, further upside looks likely for this precious metal outperformer.