Macro environment remains uncertain; Platinum finally breaks out

The big theme in Asia this week is the latest Sino-US tariff. Reports after reports are now assessing the impact of this tariff – and how badly it will affect economic growth.

Many Asian economies are likely to be hit, one way or another, as import and export of goods slow.¬†For Hong Kong, the increasingly out-of-control local street protests are adding to the city’s woes.

In Europe, the key focus remains Brexit. As the October Brexit deadline ticks closer, everyone is gearing for a massive political battle. The prorogation of Parliament last week has inflamed sentiment across the political spectrum. How will this turn out this week? Nobody quite knows. But we are definitely approaching a climactic episode out of the Brexit drama.

Therefore investors are concentrating on ‘defensive’ assets still. This means they are holding on to government bonds, high-grade corporate bonds (see here), the US Dollar, Japanese Yen, and Swiss Franc, plus gold and other precious metals.

And it is the precious metal sector that caught my attention. Specifically, it is the rotation into Platinum that is the highlight. This metal has been a laggard in the sector for some time. Since 2017, gold gained 25% while Platinum rose just 5% (see Featured Chart).

Platinum attempted a base breakout back in April which failed. Prices regressed all the way back to its lows at $800. But investors are sensing a ‘bargain’ here. Constant accumulation of the metal at $840-880 finally exhausted supply, and led to a massive breakout above $900 (see below).

With no obvious resistance here until $1,000, I expect more near-term upside. The macro environment is so uncertain these days. Investors like to buy cheap insurance and platinum certainly fits the bill.

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