Following is Tech Talk’s column:

Investing in platinum

The outlook for platinum is improving. Its period of seasonal strength is from the end of December to the end of May. What are prospects for the current period of seasonal strength?

Seasonal influences

Thackray’s 2009 Investor’s Guide notes that platinum has a period of seasonal strength from the end of December to the end of May. The trade has been profitable in 17 of the past 22 periods. Average gain per period was 8.3%. In contrast, the average gain for gold during the same periods was only 0.9%. The enclosed chart shows optimal entry points for the seasonal trade during the past seven years.

Chart courtesy of StockCharts.com www.stockcharts.com

Technical influences

Technical prospects for platinum have turned positive. A strong recovery rally is due. Platinum fell 67% from its all time high at $2,299.00 U.S. per ounce in February 2008 to its low at $752.10 in October. Platinum recently broke above a double bottom pattern on a move above resistance at $896.00 and has established an intermediate uptrend. Next intermediate technical target is $1,200.00 Other precious metals (gold, silver, palladium) also have developed positive intermediate technical profiles. Platinum will “piggy back” on their strength into spring.

Fundamental influences

Fundamental prospects for platinum are just starting to turn positive. Demand for Platinum mainly comes from two sources. Jewelry takes approximately 40% of production and catalytic converters used in the auto industry to control exhaust emissions take 37%. The main reason for the price decline during the past year has been a drop in demand for platinum used in catalytic converters. U.S. auto sales virtually collapsed from 17 million units in 2007 to less than 10 million annualized units by the fourth quarter of 2008. The collapse was most notable in the fourth quarter of 2008 when availability of financing by dealers and consumers became prohibitive. However, the low point in demand by the auto industry appears to have been reached. Canadian and U.S. government support of the auto industry as well as access to the TARP (e.g. a $6 billion loan to General Motors Acceptance last week) will kick start demand for autos in the first quarter of 2009. Demand for platinum by the auto industry will recover as the year progresses. Meanwhile, demand for platinum for jewelry purposes has started to recover due to its current low price relative to gold.

A direct way to invest in platinum for the current period of seasonal strength is to own iPath platinum Exchange Traded Notes (Symbol: PGM). Technicals on PGM are almost identical to technicals for the commodity.

Platinum equities also are available. Please consult with your Investment Advisors for specific recommendations. Best to avoid junior non-producing companies in the sector!

PS: (Klaus disagrees with the last line)