One of the most impressive rallies in Platinum in quite a while

Atomic number 78

There’s a bit of a story in platinum right now. Alyosha, who writes an excellent  Substack about commodities with a focus on metals and oil, said this:

One of the most impressive rallies in platinum in quite a while. The catalyst is China’s increasing appetite for gold, now possibly migrating to what has been a forgotten favorite of Hong Kong jewelers for many years. There have been false starts in XPT, a lot of them, but none has had as credible a narrative as this one, including Chinese investors looking for a cheaper alternative to gold.

NYMEX volume was the highest since the April 7 lows, a fitting symmetry. Open interest near its long term lows this morning. I will update it tomorrow.

I know Alyosha personally (not his real name) and he’s an experienced veteran who traded in the pits in the 1980s and has been an expert on commods for 40+ years. Anyhoo, I have a strong bias to buying things that are low and selling things that are high, and so I am obviously interested in this platinum thing. Also, my wedding ring is made of platinum.

Monday’s 4.9% rally in platinum is fairly unusual as there are just 78 instances of a one-day rally of 4.5% or more back to 1986 (out of 9741 trading days). I looked at how platinum trades after and the answer is: Bullish.

I tried two filters. One: Forward returns after a >4.5% one-day rally.

Two: Forward returns after a >4.5% one-day move on above average volume (using previous 10 days’ volume). The results are similar. The main part of the charts show individual non-overlapping 60-day returns while the table shows data for 5d 10d 20d and 60d returns. As I do with most of these studies, I cut the 2008 data. It showed mixed returns, but 2008 moves are huge and distort the averages.

The substitution effect is an interesting and logical narrative. I suppose theory says there must be a price of gold where unchanged platinum prices become preferable to some buyers. Looks like we’re there? While looking for ways to play it, I was reminded of how useless Google is these days compared to Perplexity. Here are my search results from Perplexity. Tight, relevant, useful. I ended up buying PLTM and PLG.

Google’s top link was a Motley Fool article that did not even mention the listed platinum ETFs. Second link was a Benzinga article full of popups that also didn’t mention the platinum ETFs. Then continue to a 2-year old Reddit post and a Yahoo article from 2018. Google search results are bad. OK, sure ETFs are not technically stocks, but Perplexity understood my query and delivered zero spammy ad-filled garbage like Benzinga and Motley Fool constantly shovel.

The chart, as Sal would say, is a looker. Two big triangles breaking with 1100 as the big breakout level above. Looks bullish to me.

Getting quite far outside my area of expertise, here, but this is PLG (Platinum Group Metals, NYSE) vs. the price of spot platinum

Two out of three ain’t bad

The equity leg of the SELL AMERICA basket continues to disappoint while the P&L of vol-weighted SHORT BONDS SHORT USD is creeping back towards the YTD highs. Note that the entire P&L for the year needed to be captured in the first 10 days of April. I think this thing will take out the highs and keep going higher as the Big Beautiful Deal delivers unfunded tax cuts like a boss.

Final thoughts

For all the foofaraw around American deficits, US 10-year yields are actually lagging the UK and Japan.

For my new book, I asked ChatGPT to make a comic of the classic economics joke and it did a great job!

I hope that today, despite all your rage, you are not just a babe in a cage