 |
|
|
 |
|
|
|
|
 |
|
Markets to Watch
Look for Opportunities in Platinum
In looking for a long term investment in commodities, the platinum market is certainly a consideration. In addition to 1) platinum supply and demand equation remaining relatively tight in the face of the unfolding recession and 2) a break of $1,460 per ounce off of the highs, we have to think that a large portion of extremely negative demand fundamentals have already been priced into the equation.
Certainly, seeing the US auto sector caught in an ongoing downsizing effort is cause for near term concern, and the threat of ongoing strength in the Dollar is not to be discounted. However, given the very impressive and almost uniform rally in platinum prices since the October 2008 lows, one gets the impression that platinum is set to march higher in the coming months. While some might suggest that the platinum market is already seeing periodic flight to quality or spillover buying from the gold and silver markets, the public doesn’t seem to be aggressively involved in the platinum market. At one point this year the combined net spec and fund long in platinum did reach above the 12,000 contract level, and in the latest COT positioning reports platinum was holding a net spec long of roughly 11,000 contracts, so platinum futures might be considered moderately overbought. Still, it is our opinion that broad-based platinum investment from derivative sources is nowhere near the levels being seen in gold and silver.
We also think that, the sharp slide in platinum prices in 2008 more than factored in the potential for a sharp reduction in catalytic demand from the auto industry. Instead, the slightest sign of stabilization in the economy could leave platinum and other industrial commodities poised for “reflation.”
In the end, we think that a big kicker for platinum could come if gold and or silver became expensive again, prompting small investors to consider derivative investments in platinum ETF’s. While the threat of increased investment interest in platinum isn’t imminent, the net impact of even a modest increase in ETF-type demand could easily have a major impact on the market. Back when silver ETFs were introduced three years ago, silver saw its entire exchange warehouse stocks matched in the first two weeks of ETF sales. Likewise, just a minor pattern of rising investor demand in platinum could throw the world balance back toward the big deficits last seen in the late 1990’s to early 2000 time frame (see chart).
Clearly the lost demand from the auto sector is significant, but as was seen in gold and silver, the presence of fresh investment demand can really cause implied demand readings to jump. Furthermore, for those anticipating inflation to return at some point in the future, the platinum market could be considered a prime inflationary hedge vehicle, especially since the platinum market currently sits $1,100 below the 2008 highs.
If you’d like to receive daily information on platinum, click here.
Suggested Trading Strategy:
- Buy July platinum at $1,120 with an initial objective of $1,350 and an eventual target of $1,590. Risk the trade to a close below $1,085.
If you’d like to further discuss this strategy, or the best way to execute it, contact us.
|
|
|
Industry News
Despite Signs of Improvement, Serious Problems Remain
While the euphoria of the last month might not be direct evidence of the end of the US sub-prime turmoil, any time the economy can manage to forge a whole month of positive action in the equity markets and in the process see some signs of improvement in various numbers has to be considered a positive. Clearly, serious problems remain, with the funds allocated for the TARP program dwindling, the US auto sector in the process of contracting and US unemployment levels still on the rise. However, in the wake of the latest US quantitative easing effort, US mortgage rates have declined, and a wave of refinancing has appeared to take hold, and that might help to slow the decay in the housing market. On the other hand, the latest US house price survey showed another record slide in prices, and thus far markedly lower pricing has not provided much of a boost to sales.
In the coming month we see a partial economic letdown in the wake of the March US payroll readings, the probable bankruptcy of GM and perhaps even a contentious battle in the US Congress over additional TARP funds. In fact, in the event that slowing in the US continues to spread (which is likely in the wake of a significant downsizing of GM), it is possible that Congress might want to toss around the idea of another stimulus package, and that would be at loggerheads with the request for additional TARP funds.
While some think that unused TARP money will eventually be given back to the government, we doubt that the banks intending to return the money are going to break their backs to get it in quickly, and that could mean that TARP will run out of funding for the next crisis should it surface. In another positive development, the short end of the market seems to be behaving, and that is certainly a sign that some of the US efforts have produced results.
In conclusion, there are signs that the pace of decay in the economy can be arrested, but there are also signs that we still have some difficult times ahead. In fact, in the face of near term Dollar gains, negative sentiment off US payrolls and the overbought status in a host of physical commodity markets in the wake of the March run up, we think that a certain amount of retrenchment in certain physical commodity prices is possible for the month of April.
Keep a pulse on the industry and access more industry news.
|
|
|
| In This Issue |
|
|
 |
|
|
| Trading Tip |
|
|
|
Standing aside is a position.
Most people do not have the time or the experience to trade futures profitably, so choosing a broker is the most important step to profitable futures trading.
|
|
|
|
|
|
|
|
|
| Did You Know... |
|
|
|
In today’s Fast Break article, CME Group noted...
“In the midst of the declines that have ravaged many portfolios, managed futures accounts still were able to rack up an average return of 13.5 percent.”
Learn more about opportunities in managed futures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
 |
|
Premium Guide to Managed Futures
This comprehensive guide, compliments of CME Group, is designed to help you understand the fundamentals of managed futures and will aid you in determining whether or not managed futures fits within your personal investment strategy.
Specifically, your informative guide will include:
- The history & growth of the managed futures industry
- Specific benefits of managed futures
- The efficiencies and performance of futures markets
- Managed futures trading strategies
- Types of investment opportunities
- An evaluation of risk from an investor’s perspective
- How fees are structured and more!
|
|
|
|
|
|
About Daniels Trading
Daniels Trading is a relationship-focused commodity futures brokerage located in the heart of Chicago’s financial district. Founded in 1995, we have a history of providing effective and reliable trade executions to both individual traders and institutional investors around the globe. In addition to our focus on relationship and execution, Daniels Trading is a leader in providing ongoing education opportunities and resources for our customers.
- back to top -
---
If you did not register the email address above and believe you received this message in error, please call us toll-free at +1.800.800.3840, or click the following link below to remove your address from the mailing list: http://www.danielstrading.com/subscription/unsubscribe/?email=%%EmailAddr_%%.
(It may be necessary to cut and paste the above URL if the line is broken)
|
|
|
|
|
|
|
|
 |
|
|
