First gold, then silver; TD Securities now has a tactical short bet for platinum
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(Kitco News) - TD Securities is looking to complete the bearish trifecta in the precious metals market as they have announced a tactical short position in platinum.
Daniel Ghali, senior commodity strategist at the Canadian bank, published the trade Wednesday morning as prices struggle to hold gains above $1,000 an ounce. January platinum futures last traded at $997.90 an ounce, up 0.22% on the day.
In the note to clients, the bank said that it is shorting platinum at $993.20 an ounce and looks for prices to fall to $850 an ounce within the next two months.
Ghali said that it is clear buying momentum in the precious metal is close to being exhausted.
"The set-up for a bull trap has been forming in precious metals markets, as a slew of narratives ranging from an imminent reopening in China to peak central bank hawkishness catalyzed a massive short covering rally, exacerbated by CTA buying activity," he said in the note. "Buying exhaustion appears most notable in platinum markets, with only minimal follow-through buying activity expected even for the bull case in prices. Instead, platinum prices are now vulnerable to a tactical sell-off as substantial CTA selling activity is expected as prices are weighed down by a sluggish Chinese recovery and as the backlog that feeds auto sales begins to subside with global economies headed towards recession."
Although the Canadian Bank is tactically short on platinum, they see long-term bullish potential for the precious metal. In its 2023 outlook published last week, TDS said that it sees platinum prices pushing to $1,100 by the end of the year and rallying to $1,200 by the end of 2024.
"Overall, platinum as a share of total automotive PGM consumption has actually been increasing in recent years," the analysts said in the report. "At the same time, after two consecutive years of investment outflows, the eventual central bank pivot should fuel a combination of both increased industrial demand and investment demand."
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The TDS platinum call is the latest in short bets it has made in the precious metals sector. The bank first turned bearish on gold in late July and doubled down on its short bet in August. The bank expects gold prices to fall to $1,575 by the first quarter of 2023.
Analysts announced a short position in silver as it looks for prices to fall to $17 an ounce.
Analysts at TDS noted that gold prices have some near-term upside potential, with many looking for prices to test resistance at $1,800.
"Positioning risks in gold markets are still skewed to the upside, as a minor extension in prices could translate into notable CTA buying activity. This would be an appealing set-up for precious metals bears looking to fade the rally, but signs of CTA buying exhaustion across rates and currency markets suggest the likelihood of this scenario is fading," the analysts said in a separate note Wednesday.