Platinum Spot (Platinum)
What is platinum?
Platinum is one of the rarest metals, one of the most expensive commodities, as well as a chemical element numbered 78 in the periodic table of the chemical elements. First mentioned by the Italian scholar Julius Caesar Scaliger in 1557, platinum is a dense, malleable, ductile greyish-white metal, belonging to the platinum family, also known as the platinum-group metals (PGMs). These are iridium, osmium, palladium, platinum, rhodium and ruthenium, all having similar anatomical, chemical and physical characteristics.
How is platinum extracted and produced?
Generally, platinum is extracted from placer deposits or other ores (including sperrylite and cooperite), containing platinum family metals. Just like other PGMs, platinum is produced as a byproduct of copper and nickel mining and processing. In addition, platinum can be obtained as a result of recycling scrap metal.
Annually, miners extract more than 170,000 kilograms of the metal. However, this is an expensive endeavor, and the price of the price of platinum determines whether it is reasonable to mine it. Thus, due to low prices of platinum in recent years, miners have reduced production of the metal.
South Africa is a key global supplier of platinum. The country owns over 90% of the world’s PGMs reserves, and the Bushveld Igneous Complex (BIC), which is located within its territory, contains the world’s largest PGMs reserves. Other top platinum mining countries include Zimbabwe, Russia, the United States and Canada.
What is platinum used for?
Along with other PGMs, platinum boasts remarkable catalytic properties, which has been exploited in different industries. However, most of the industrial applications came into life after the 1970s, when automobile emission standards were implemented. They required cars to have catalytic converters to manage harmful exhaust emissions. This generated a huge demand for platinum family metals and for platinum in particular. Nowadays, the automotive industry makes up 40% of the gross demand for platinum.
Over 30% of mined platinum is used in jewellery, where it is sought for its silver-grey colour and resistance to tarnishing.
Other industrial applications of platinum include fuel cells, oxygen sensors, turbine engines, spark plugs, dentistry equipment, magnets and more.
Platinum vs. gold
The price of platinum is more volatile as compared with gold, which is relatively stable and is considered a safe haven. Additionally, gold can boast much bigger trading volume on the eCBOT. Silver and copper outperform platinum as well.
Platinum mining takes more time (5-7 months) as compared to gold and is more expensive as well: the cost of mining 1 ounce of platinum is twice as much as that of an ounce of gold. Roughly speaking, there is 2,800 tons of gold produced annually while platinum production is about 250 tons. To obtain 1 ounce of platinum, miners need approximately 10 tons or ore.
How can I invest in platinum?
One of the ways it to purchase physical platinum in the form of coins or bars, having the size of one ounce, ten ounces or 1 kilogram.
Platinum futures is another investment option. A futures contract holds that you agree with the other party to buy or sell platinum at a predetermined price and time. The metal has to be bought or sold upon the expiration date unlike options, where buying or selling is a right, not an obligation. This advantage, however, comes with a premium that options investors have to pay.
Both platinum futures and options are used for hedging and speculation.
Platinum futures are traded on the New York Mercantile Exchange (NYMEX) with the minimum contract size of 50 troy ounces, and the Tokyo Commodity Exchange (TOCOM) with the minimum contract size of 500 grams.
Platinum options use one NYMEX Platinum futures as a contract unit and are listed on the NYMEX.
Traders can also speculate on platinum via contracts for difference (CFDs). This derivative contract saves you the trouble of buying the very metal, but you can still benefit from the fluctuations of the platinum prices. The difference between the value of platinum at the beginning and expiration of a contract makes the value of a CFD. You as a trader have to forecast, which way the platinum price will go and take a long or short position.
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