Sunday, January 13, 2013

The Platinum Indicator

In my previous post. I said that the silver shake-out indicator being set up is one of several signs that the long consolidation in the precious metals was nearing an end. Another such indicator is platinum. For whatever reasons, it has long been observed that platinum tends to lead gold in major moves up. One reason for this that comes to my cynical mind is simply that platinum is not as heavily manipulated and suppressed as gold. So as big money moves back into the PM sector, platinum winds up being the trailblazer.

As a past example of this, let's take a look at how the big move out of the 2005 consolidation range took place. Since a weekly bar chart filters out a lot of distracting noise, lets compare gold and platinum over that time. First, what did gold do?

Gold bounced around in the range making several trips to the bottom before finally breaking out in September. Now let's look at what platinum did:

Platinum did not go to the bottom of the range toward the end and broke into the major rally many weeks ahead of gold.

This pattern does not always hold true, but platinum has a very strong tendency to lead gold - and at the tail end of the train is silver, the most heavily manipulated of the metals.

So what is gold doing now on the weekly chart?

Gold sank to the lows of the range at what will likely be near the middle, in May of last year. It is now stuck in the lower half of the range and has not broken the downtrend line formed since the high it made back in October. What's platinum up to?

Platinum was a little more hesitant to hang around the May lows and began acting better than gold after this point. And just this past week, it forcefully broke the downtrend line from October and is now well into the upper half of the range on good volume. It seems to want to again lead gold out of the range.

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