Platinum

South Africa produces 80% of world's platinum. Power shortages in that country cut platinum production by 16% in January. No wonder platinum surged 36% this year through the end of last week.

But the wheel turns, and now the white-hot metal is cooling off big-time. Going forward, it could be in for a precipitous drop.

The demand picture for platinum hasn't changed much since February. What is changing is supply and speculator sentiment.

The South African power utility, ESKOM, says it is coming to grips with the power shortage.

What's more, South Africa is so concerned about the hard times for miners that it may drop plans to impose a royalty tax on mining companies. And lower taxes may encourage higher metal production.

This doesn't affect the short-term outlook on platinum, of course. But it is enough to send skittish hedge funds piling OUT of platinum the same way they piled in just a couple months ago.
And technically speaking, platinum's chart is sounding a big "sell" warning. It broke through support, which then turned into overhead resistance. It has weakness down to about $1,650, and perhaps lower.

Of course, this is only a short-term outlook. Next month, the lights might go off in South Africa again and the government there could decide platinum miners need to pay MORE taxes. And then we can ride the metal higher again.

Because that's the thing about metals - nowadays, even the worst of them is better than the best financial stock!