Most risk markets or assets have failed to make new highs in recent weeks. Also, the US Dollar index has put in a strong bottom at 76 and appears to be stable for the time being. We must also consider that strength in the price of Oil has coincided or been a cause of almost every post-war recession. While Oil went to $150 several years ago, the economy was already in recession after Oil crossed $90. Needless to say, the current price of $100 should have an impact on demand for metals like Platinum.

Despite the short-term downdraft, some analysts remain optimistic. Edel Tully of UBS notes several factors contributing to supply issues. These factors include a stronger rand, rising mine inflation and work stoppages at mines in South Africa due to electrical power issues, strikes and safety concerns. UBS forecasts an average platinum value of $1,905 per ounce for the rest of 2011 and $1,950 for 2012.

Technically, however, the market is decidedly bearish in the near-term. Platinum has broken below $1,780 and if we apply simple analysis, we get a potential downside target of $1,700. The longer-term moving averages are rising and coalescing near $1,650. Those with an optimistic viewpoint may want to let the market settle and find support.

This update is the property of CME Group

Anglo Platinum, the world’s largest producer, expects a stable price for 2011 around $1,800/lb. Growth in demand will be matched by the growth in supply, which is a positive situation and healthy when they happen,” Sandy Wood, the head of the commercial unit, said in an interview in Tokyo yesterday.

Meanwhile, the China Association of Auto Manufacturers is looking for auto demand to rise 10 to 15% this year after a torrid 32% increase last year. Goldman Sachs believes shortages of Platinum and Palladium are possible in the second half of the year as US demand will tighten the supply-demand picture. Though, any forecast reliant on US growth seems hopeful at best. We usually focus on the on the ground situation in South Africa. It is the majority producer of the world’s Platinum. Power outages and labor strikes have, in the past contributed to supply problems and higher prices.

As we noted at the top, Platinum failed to reach its cup and handle target. It is not too early to call failure as the market thrice failed at $1,860. It did find support at $1,780. The current range looks to be $1,780 to $1,850. The market will face immediate resistance at $1,820.

Platinum producer Impala Platinum sees 2011 prices between $1,725-$1,925. The company notes that while jewelery demand is off, automobile-related demand has firmed alongside the economic recovery.

Demand from China and India is critical to this market. China’s automobile production increased 32% in 2010 and 6% month over month in December 2010. Sales in India increased 32% in 2010 and analysts are forecasting a drop in the rate growth to 12-15% for 2011. Higher car prices and higher interest rates will curb the rate of growth.

Last week we noted the bullish cup and handle formation which targets $2,000. Platinum remains in breakout mode but if the market can’t surpass $1,860 shortly, then one has to question if we are seeing a shift in the trend. In the very short-term we see $1,840 as a critical pivot point. If Platinum is in bullish mode then we should see the market follow through in the coming days and takeout $1,860. If not, then the market could remain between $1,800 to $1,840 in the short-term.

A few days ago Mining Weekly had an interesting piece which looked at the troubles the industry is facing. Stephen Forrest, head of SFA-Oxford, a Platinum consultancy, says that mines are not fulfilling their potential due to weak management and a lack of funding. Reductions in funding since the 2008 collapse have obviously had an impact. Recycling is bound to increase in order to generate more supply.

Remember that most production comes from South Africa where power disruptions and strikes are common.

Furthermore, while Platinum has recovered in price, it hasn’t recovered as much in “real terms.” That is, compared to CRB or CCI or other metals, Platinum has lagged. Last time we noted that priced in Rand, Platinum was weaker than when priced in US Dollars. The Rand price is more important to the world market as most production comes from South Africa. The Rand price has performed strongly in recent weeks.

Turning to the chart, we noted a cup and handle target of $2000 that fits in between a pocket of resistance at $1900-$2100. Today the market appears to be breaking away from the $1780-$1840 consolidation. That breakout projects to $1900. Platinum looks quite strong and likely to perform well in the coming days and weeks.

Last week we learned that Chinese imports of Platinum jumped 40% in 2010. The Chinese Association of Automobile Manufacturers expects vehicle sales to grow 10-15% in the country in 2011. Sales grew 32% in 2010. Investors and traders will have to weigh tighter policy in China, along with market sentiment against actual demand. Industrial demand is more than compensating for the decline in jewelry demand.

More so than demand, production is a big key. The reason is that the vast majority of production comes from South Africa which can be sensitive to worker strikes, power disruptions and the like. A small disruption in South Africa is magnified as there is no other significant source of production.

Meanwhile, the strength in the South African Rand means that the price of Platinum in South Africa remains roughly ⅓ off its 2008 high. In US Dollar terms, Platinum is 24% off its high. This means that your average producer in the US is better off (based on price) than in South Africa. In other words, persistent strength in the Rand can impact production.

Turning to the chart, we note strong weekly support at $1,740. There is a potential cup and handle pattern that projects to $2,060. We note resistance from 2008 at $1,900-$2,100. As long as the market holds $1,780 then the uptrend shouldn’t be in question. Second support is $1,740. Our initial upside target is $1,900.

This update is property of the CMEGroup.

Copper

As we pen this, Copper for March delivery is trading higher by about 1% to $4.32/lb. Copper has continued to work its way higher in the last month after it reached a new all time high above $4.07/lb. The move past four-year resistance has thus far been sustained as Copper has moved another 5%-6% higher.

In other news, the London Metal Exchange reported that a single trader holds 80%-90% of its stockpiles, which equals half of all the exchange-registered supply in the world. The position is worth $3 Billion. Sources say its JP Morgan, who owns the position on behalf of clients. Regardless of who holds the actual position, it clearly adds potential volatility to the market. Some hearken back to the Hunt brothers and their attempt to corner the Silver market.

Heading into 2011, most analysts are optimistic. BMO Capital Markets is looking at Copper as its commodity of the year in 2011. BMO projects a deficit of 380,000 metric tons. Standard Bank projects a deficit of 385,000 metric tons, growing to 562,000 in 2012. BNP Paribas is looking for a deficit of 200,000 tons in 2011. Goldman Sachs expects accelerating demand and shrinking stockpiles to propel Copper to $11,000 per tonne ($4.99/b) in 2011.

Its interesting to note how analysts seem to ignore macro-related issues. Two-years ago, Copper was trading below $1.50/lb. Since then China’s growth has accelerated while US growth has remained well below trend even amid quantitative easing and federal stimulus. Does that sound like a case for a tripling of the price of Copper? Now, factor in sovereign debt issues in Europe, a weak US Dollar, massive federal spending and two rounds of quantitative easing. Sounds like the macro issues had more of an impact then specific supply/demand issues.

Heading into 2011, investors will have to weigh those macro issues. Will China’s tightening curb growth? Will rising interest rates in the US reduce growth even further? Or, will rising interest rates in the US force even more debt monetization and an even weaker than expected US Dollar? Hence, we figure that Copper could continue to be held hostage to macro forces.

Turning to the chart, we see that the market rallied past $4.20 and retested it successfully. The path of least resistance continues to be higher.

Platinum

Platinum for January delivery is nearly $22 higher to $1757/lb. Today we are seeing strength across the board in the metals complex.

Heading into 2011, analysts are more bullish on Palladium then Platinum. Palladium is up 82% year to date while Platinum is only 16% higher. It is amazing how professional analysts will simply follow the herd. One thing to note regarding Platinum is the potential for supply shocks. South Africa supplies about 80% of the world’s Platinum. Platinum is higher on the year but the Rand is higher by about 9%. This means that the price for most producers is not sufficiently higher than one year ago. If the Rand continues to be strong, than output could be affected.

While Commodities have had a strong run the last seven months, Platinum has actually dramatically underperformed Commodities, industrial and precious metals.

Turning to the charts, we note that Platinum, throughout 2010 formed a cup formation. A cup with a small consolidation is known as a cup and handle. This pattern is frequently occurring and one of the most reliably bullish patterns. The pattern projects to $1950/lb. The longer-term charts show resistance at $1900. A weekly close above $1760 would constitute an important breakout. Platinum appears to have strong demand at $1720-$1725/lb.

Copper for December delivery is down by 1% to $3.80 on this Wednesday afternoon. The US Dollar has endured a volatile session on its way to a current $0.01 gain. The markets have a bevy of factors to deal with today. Traders and investors have to digest the elections along with the coming Fed announcement.

Keep in mind that markets are always a discounting mechanism. Today’s news is always discounted in advance. The market had to know that there would be a shift in Congress and gridlock in government. Thus, that has to already factored in. The market, thus far, doesn’t expect any major policy changes. In other words, don’t count on a tighter budget or austerity.

Bloomberg reports that job gains of 43,000 in the private sector may help the Fed to ease stimulus. With millions having lost jobs and being unemployed, it is highly unlikely that minute job growth would have an impact on Fed policy.

Copper and other commodities have a great run but have held firm in recent days and weeks. Those who are fearful of the Fed, likely already trimmed positions. However, as Copper has had a strong run, it would hardly be surprising to see weakness or a selloff regardless of whatever comes out of the Fed today.

Turning to the chart we note that Copper has continued to hold $3.70 while remaining in the $3.70-$3.90 range. A break of $3.70 would lead to $3.50. Obviously, the market is to digest the long-term supply in the $3.70-$4.10 range.

Platinum

Platinum for January delivery is down roughly $14/lb to $1,705/lb. Platinum over the last few weeks has consolidated from $1,675 to $1,720. On the daily chart this has the look of a bullish consolidation. The minimum target would be $1,765, a new high for 2010. Today the US Dollar has moved back and forth between gains and losses. It is currently higher while most metals are lower.

Billionaire investor George Soros has raised his stake in Platinum Group Metals. Soros upped his position from 14 million to 15.5 million shares. The company is moving its Western Joint Bushveld project into production. Perhaps Soros, who already owns Gold, sees value in Platinum as both an industrial and precious metal.

The stronger the precious metals are, then the more Platinum can trade with Gold and Silver. When precious metals are weak, Platinum is entirely an industrial metal. For now, it is holding up well in a corrective state right alongside Gold and Silver.

Turning to the chart, we see that Platinum has essentially remained in a tight range over the past five weeks. The longer it holds this range, the more bullish the consolidation becomes. We should also note that net-non commercial long positions are at an all time high. Speculative money is positioned long and has been unfazed by the recent consolidation.

After a bad day yesterday Copper is higher today in part due to a weaker US Dollar. Copper for December delivery is higher by $0.02 to $3.79/lb. The US Dollar index is down by 0.8% which is a large move for a single day. Over the last several weeks, Copper has been stuck between $3.70-$3.90.

There is a labor dispute at the world’s fourth largest Copper mine in Chile. Workers at the Collahausi mine (owned by Anglo American and Xstrata) rejected a wage offer yesterday. Workers will continue negotiations if the company is willing to talk, according to the union’s secretary. This does not sound threatening but it is adding to strength in the short-term.

In other news, word has gotten out that JP Morgan has filed a preliminary prospectus for a $500 million copper ETF. Investment demand is not a player in the base metals market but it could be with the launch of an ETF. Consider what has happened in the Gold and Silver markets. According to JPMorgan, the fund is “intended to provide institutional and retail investors with a simple and cost-efficient means, with minimal credit risks, of gaining investment benefits similar to those of holding physical copper”. An ETF could take thousands of tonnes of the metal off the market. However, it is difficult to quantify in the short-term.

Turning to the chart, we see that over the past few weeks Copper has stalled below $3.90/lb though it has remained above $3.70 each of the past four weeks. Previously, we noted the strong resistance from $3.70-$4.00. It will take the market quite a bit of time to work through that supply. A break of $3.70 would lead to a test of support at $3.50.

Platinum

Platinum for January delivery is higher by 1% to $1,694/lb. Platinum fell $22 yesterday as the US Dollar had a strong rally. It is higher today as the US Dollar is lower by 0.8%.

Platinum had been rising due to four elements. First, US Dollar weakness. Second, strength in precious metals. Third, Fed policy. Fourth, ongoing strikes at Northam Platinum. The strikes have been resolved, precious metals are in correction mode, the US Dollar has found some footing (temporarily) and lastly, Fed policy has to be priced in to most markets.

In recent weeks, Platinum tried but failed to hold above $1,700/lb. In each of the past four weeks, the market closed well off the highs (even in the up weeks). This indicates distribution. Initial support is at $1,675 followed by $1,650. Strong short-term resistance exists at $1,700 and $1,710.

Meanwhile, net non-commercial long positions (speculative money) are at an all-time high. Open interest is also at a marginal all-time high. Speculative long positions have increased quite a bit in recent months. Unless we get extreme US Dollar weakness then look for Platinum to continue to correct and consolidate. A weekly close above $1,700-$1,710 could change the outlook.

Jordan Roy-Byrne, CMT
http://www.thedailycommodities.com

Copper

Copper for December delivery finished Wednesday higher to $3.80/lb. The US Dollar index suffered by more than a full point, thus boosting all markets after a tough Tuesday. Technically, Copper has major supply to work through in the $3.70 to $4.00 range, as we’ve previously noted.

Yesterday China unexpectedly raised interest rates for the first time since 2007. The move spooked all markets. We should note however, that most markets were quite extended in the short-term and ripe for a pullback. Copper has looked tired over the last few weeks. Part of that is the resistance at these high prices and part is due to a market needing to digest gains after a strong run. Interest rate rises can also be taken as a vote of confidence. Economies may be strong enough to withstand rising interest rates.

Meanwhile, Copper inventories at the London Metal Exchange continue their decline. Inventories are now at nearly a one-year low. Analysts are more concerned about output. Bank of America yesterdays said they expect prices to trade “well above” pre-recession record highs due to weak growth in copper mine output. That is quite the aggressive call. We are hearing less and less about Copper demand. Remember, it is only one part of the equation. A weak US Dollar and weak production can more than offset stagnant demand from the US and Europe.

Turning to the charts, we see that the market had risen nine out of eleven weeks prior to this week. As the market struggles in the aforementioned resistance zone, traders may want to key on support levels at $3.70 and $3.50.

Platinum

Platinum for January delivery was higher by $14/lb and has tacked on more gains in the thin post-market session. The last trade was at $1,691/lb. In recent weeks, Platinum stalled near its April highs. Technical resistance along with a firmer US Dollar contributed to stalling a strong two-month advance.

Days ago the National Union of Mineworkers in South Africa agreed to end its strike with Northam Platinum. After failed negotations, the NUM accepted a pay raise of 10-13% and an additional housing allowance of R200 (R1800 total). The NUM was looking for pay increases of 15% and an R3500 housing allowance. We’ve seen more strikes in the last year or so and analysts have noted that the miners seem to have the upper hand. Most Platinum is produced in South Africa, so traders and investors absolutely need to keep happenings in South Africa on their radar.

In other news, a small Swiss firm is looking to include Platinum and Palladium in its “asset-backed” ETF. The company, Basinvest has attracted F26 million for its physically backed and actively managed fund since its introduction in May 2009.

As of last Tuesday, net non-commercial long positions in Platinum were at a record high since the CFTC started collecting the data. This is another way of saying that there is a high degree of speculation in the market.

Turning to the chart, we see short-term support around the $1625-$1650 area. That area will be tested if Platinum closes the week below $1675-$1680. Strong resistance lies at $1700-$1720.

Copper for December delivery finished Tuesday down less than 1% to $3.66/lb. In the very thin late session or early Asian session, the market has tacked on 1% and is at $3.80/lb. The sharp uptrend in the market has paused as the US Dollar index found support at 77.00 and has remained above that level for the past four days. Both markets were stretched in one direction and naturally we’d expect a pause or retracement.

News out of China has had an impact. Their central bank raised reserve requirements for six banks over a two-month period. The move is aimed at cooling the red-hot property market. Analysts expect prices could fall by 10% in the next 6-12 months. When this could impact Copper is difficult to say. Obviously, it is something that traders and investors need to keep in mind. The property bubble in the US aided Copper and then took it down. We aren’t saying the developing bubble in China is of the same magnitude. It is just something to keep in mind.

Standard Bank expects Copper to be in deficit this year by 58,000 tonnes as a result of increasing demand and some supply disruptions. They also expect a shortage of 199,000 tonnes in 2011 and 457,000 tonnes in 2012. The price in 2012 will average $8,700/tonne, which equals $3.94/lb.

Turning to the chart, Copper has made its way to $3.80/lb. It has tested $3.65 twice in the last two weeks. That is immediate support. The range of $3.70 to $4.00 is long-term resistance. Public opinion on Copper (from sentimentrader.com) is at 59% bulls, which is hardly excessive in the bigger picture. We should mention that non-commercial long positions are close to a one-year high.
Platinum

Platinum for January delivery is currently trading at $1,696/lb, which is $13 higher than Tuesday afternoon’s close of $1,683. The market has declined in three of the past four sessions. In our Copper commentary we noted that the US Dollar has held above its low, registered four sessions ago. Platinum has gained roughly 15% in six of the past seven weeks. A pause or correction is natural.

Recent rhetoric and indications from the Federal Reserve has stimulated various markets from stocks to commodities but not yet economic activity. Now we are seeing more hints of the Fed’s intentions in the media as they broach the idea of rising inflation expectations. If low interest rates and quantitative easing can’t stimulate consumption and borrowing, than perhaps rising inflation expectations can. We do know that it will be bullish for commodities.

Meanwhile, the (NUM) National Union of Mineworkers in South Africa said they see a long strike between Northam Platinum and its workers. The NUM, who is representing the miners, has rejected several offers including the latest of a 9.5% pay raise and housing allowance of 1750 Rand/month. The NUM is demanding a 15% pay raise and housing allowance of 3500 Rand/month. The market’s fear is not this situation but that it could give rise to more strikes in South Africa, which would affect future Platinum output.

Turning to the chart, Platinum reached $1,721 last week. There is strong support at $1,650 while $1,725 to $1,750 is resistance. Currently Platinum rests at the upper end of that range. Look for the market to continue to take its cues from the greenback