Platinum/Gold Spread: Updated Reentry Parameters

Platinum/Gold Spread

Currently, the blog is working a hypothetical order to buy the July-June platinum/gold spread on a two-day close above the declining 50-day MA or a one-day close above the March 6th peak. With a new month starting tomorrow, we are going to move a little further out in the gold and use the August contract. Also, we think there’s room to finesse the entry parameters just a bit for a better setup.

Back in early March the platinum/gold spread closed above the declining 50-day Moving Average for the first time since July and exceeded a prior month’s high for the first time since early June. This signaled a trend change and elected our (hypothetical) parameters for entering a long position. Less than two weeks later, the spread plunged to a new contract low and elected the liquidation parameters.

New Parameters

Since the 50-day MA didn’t work, let’s use the slower 75-day MA to gauge the trend. The July-August platinum/gold spread has not closed above the 75-day MA since early August. Coincidentally, it just so happens that the 75-day MA (currently at -$34.20) is in close proximity to the April high of -$34.90 (the spread has only surpassed a prior month’s high once in the last ten months).

July Platinum August Gold spread daily

July Platinum August Gold spread daily

Therefore, a close above these two markers could alter the bearish price structure and trigger a bullish trend change signal worth taking for a reentry. After all, platinum has been trading at a discount to gold for three and a half months now. This can’t go on forever.

Trade Reentry Strategy:

Cancel the current order in the July-June platinum/gold spread and replace it with a new order to buy two 50/oz. July platinum futures contracts and simultaneously sell one 100 oz. August gold contract if the spread closes above the April high of -$34.90 (premium gold). If filled, the exit on a two-consecutive day close $5/oz. below the contract low that precedes the entry signal.

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