Trade idea: Buy Platinum Gold Spread

The spread between Platinum and Gold closed the second consequent week tighter (max was 351$ now around $260)  and this was accompanied with increasing open interest in Platinum futures in NYMEX. It´s time to act as like we mentioned in our article last week there are fundamental reason to expect this spread to tighten or even Platinum to become more expensive than Gold. 

BUY 10 oz Platinum XPTUSD at market (currently @ 1,096.70$/oz)

SELL 10 oz Gold XAUUSD at market (Currently @ 1,355$/oz)

SPREAD is 1,355.00-1,096.70=$258.30

RISK: Partially your risk is hedge by the fact that you have long and short positions the same time. Therefore we don´t use stop orders however we need to follow manually the difference between the two metals. If it reached the all time high at 351 and closes 2 days above, we get out from the position and close it with a loss off app 940$. Position sizing is key to risk management in this point. Don´t get over leveraged. Remember you may need to hold the position for months maybe more than a year, to reach the last target and during this time you need space to trade something else.

PROFIT TARGET: We have 3 profit targets

For 5 oz: spread reaches 0$ (we move the stop to Entry

For next 3 oz: spread reached long time average at $184 (we move the stop to 0$ for the remaining 2 oz)

For the last 2oz: the target is the 2011 spread high 500$/oz

What else can you do:

• If you have +$100k or bigger account you , you may consider to buy 2 lots of Platinum futures (1lot=50oz) and sell 1 lot of Gold futures (1lot=100oz)
• If you have smaller account, you can use CFDs or FX crosses to buy few ounces of Platinum and simultaneously sell the same amount of Gold
• If you don’t have margin account you can buy Long Platinum ETFs and Short Gold ETFs, more on this you can find here

Technically Platinum showed strong momentum on Friday closing above $1100/oz while Gold bulls showed hesitation the second day even managed to close the week above 1358. Monday Gold chart indicated a possible change in trend momentum (engulfing pattern after an outside day) after reaching 2014 highs. 

Platinum is however far away from these levels. The Difference in momentum should be the key between these two metals. While we expect the Gold go more choppy, potenciall reaching $1,400/oz , Platinum still has a plenty of room to strengthen as its 2014 highs are at around $1,500/oz levels.

The risk is that the hesitation from gold market will be transferred to other precious metals and / or that the global uncertainty will not allow to Platinum to catch up with Golds momentum

I hope this helps, please let us know how did you applied the strategy and how did it work if you decided to trade it. Please like us on FB.

Don´t forget to watch you risk and be consistent

Mr. TechMan

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading       teams view on past and current economic and capital market environment. It is not and shouldn´t been viewed   as an investment advice and the creator of this material shouldn´t been hold liable for any loss resulting from       action where despite this disclaimer someone would consider this  material  as an investment advice.