Why is the platinum market important to traders?
First mentioned by the Italian scholar Julius Caesar Scaliger in 1557, platinum is one of the most expensive commodities. Together with silver and gold, platinum is rare and belongs to the category of precious metals.
Platinum is a malleable, dense, ductile metal, which forms the basis of the platinum family, also known as platinum-group metals (PGMs). It consists of 6 metals with similar chemical and physical characteristics, including: iridium, palladium, osmium, ruthenium, rhodium and, of course, platinum.
The precious metal is even more rare than gold. Annually, miners extract only 130 tonnes of platinum, compared to 1,700 tonnes of gold. The cost of mining per ounce is also twice as expensive.
Platinum market trading hours
CME Globex provides electronic trading for 24 hours/6 days a week:
- Sunday to Friday, 18:00 – 17:00, with a 60-minute break each day.
- Monday to Thursday, 00:00 – 21:00 and 22.05 – 00.00
- Friday, 00.00 – 21.00
- Sunday, 22.05 – 00.00
How to trade platinum
There are several major reasons to trade platinum:
The presence of the platinum commodity in an equity-only portfolio can lower the volatility, due to the absence of a correlation between the metal and other asset classes.
- Safe Haven
Commodities can serve as a safe haven in times of global economic uncertainty and market turbulence, because they can retain their value.
- Inflation Hedging
Commodities’ intrinsic value is independent from currencies. They will often hold their value, even if a currency falls during a period of inflation.
- Speculation on platinum spot prices
Trading platinum requires some consideration, due to the market’s occasional high volatility and a wide choice of available instruments, from platinum derivatives, such as futures and CFDs, to platinum mining company stocks.
The metal's importance as an industrial material, its relatively low production, and concentration among a few suppliers can make its price volatile. Trading platinum can result in a high degree of risk. The chance of making large profits goes hand in hand with the risk of large losses.
How to trade platinum CFDs
One of the easiest and most popular ways to trade platinum is with CFDs.
A contract for difference (CFD) is a type of contract between a trader and a broker in order to try and profit from the price difference between opening and closing the trade.
Investing in platinum CFDs saves you the inconvenience of paying for platinum storage. In addition, CFDs give you the opportunity to trade platinum in both directions. No matter whether you have a positive or negative view of the platinum price forecast and predictions, you can try to profit from either the upward or downward future price movement.
Moreover, trading platinum through CFDs is often commission-free, with brokers making a small profit from the spread – and traders trying to profit from the overall change in price.
Additionally, the 10% margin offered by Capital.com means that you have to deposit only 10% of the value of the trade you want to open, and the rest is covered by your CFD provider. For example, if you want to place a trade for $1,000 worth of platinum CFDs and your broker requires 10% margin, you will need only $100 as the initial capital to open the trade.
Why trade platinum CFDs with Capital.com?
Advanced AI technology at its core: A Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative News Feed offers a range of materials to put him or her back on the right track. The neural network analyses in-app behaviour and recommends videos and articles to help polish your investment strategy. This will help you to refine your approach when you trade platinum.
Trading on margin: Thanks to margin trading, Capital.com provides you with the opportunity to trade platinum CFDs and other top-traded commodities, even with a limited amount of funds in your account.
Trading the difference: By trading platinum CFDs, you don’t buy the underlying asset itself. You only speculate on the rise or fall of the platinum spot price. CFD trading is no different from traditional trading in terms of its associated strategies. A CFD trader can go short or long, set stop and limit losses and apply trading scenarios that align with his or her objectives.
All-round trading analysis: The browser-based platform allows traders to shape their own market analysis and make forecasts with sleek technical indicators. Capital.com provides live market updates and various chart formats, available on desktop, iOS, and Android.
Focus on safety: Capital.com puts a special emphasis on safety. Licensed by the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows clients to withdraw money 24/7 and keeps traders’ funds in segregated bank accounts.
Top 5 platinum market businesses
Buying shares of mining and exploration companies is another popular, albeit indirect way of trading platinum. In times when platinum is rising, investors in platinum stocks can profit. A list of some of the key players in the platinum market includes the following businesses:
- Anglo American Platinum
- Impala Platinum
A leading producer of platinum and associated PGMs. Originally, the company was known as Bishopsgate Platinum. Its shares are listed on the Johannesburg (JSE) and London Stock Exchange (LSE).
A British producer of platinum group metals. The popular British newspaper the Observer once owned the business. Lonmin’s shares are listed on the Johannesburg (JSE) and London Stock Exchange (LSE).
- Norilsk Nickel
Russian nickel and palladium mining and smelting company. The company’s shares are listed on the London (LSE) and Moscow Stock exchange (MCX).
- Sibanye Stillwater
The world’s third largest producer of platinum, also involved in gold production. The company’s shares are listed on the Johannesburg (JSE) and New York Stock Exchange (NYSE).
Platinum price history
Historically, platinum is subject to both investment and industrial demand, which significantly drives its price. In terms of global supply, South Africa accounts for a large percentage of platinum production and this production also has a strong impact on its price.
Therefore, the major platinum price drivers are:
- Economy of South Africa
95% of the world’s platinum reserves belong to South Africa, which makes it a top platinum producer with 75% of the global platinum supply. Volatile markets due to political unrest or labour strikes, may slow down the production.
- Health of the International automotive industry
40% of the world’s demand for platinum comes from catalytic converters. Therefore, the automotive industry has a significant impact on platinum commodity prices. When the auto industry is in good health, platinum tends to performs better.
- Development of electric vehicles
The increasing popularity and demand for electric vehicles is something that could reduce the demand for platinum.
- Changes in Catalytic Converter Technology
- Investment demand
Though the investment demand for platinum commodity represents only a small part of the overall annual demand, US dollar weakness and high prices for gold may cause increased investors’ interest in platinum.
In terms of historical price action, platinum hit its all-time high of $2,253 per oz in March 2008. The platinum commodity’s record low of $97.70 happened in January 1972.
In 2017, the average price for platinum stood at $ 948 per troy ounce. In 2018, the average platinum price is estimated to be around $1,090. The latest platinum price per ounce (oz) as of 17 October 2018 was $842.
According to some recent estimates, the annual mining of platinum totals over 170,000 kilograms. However, this number tends to decline, due to the cutbacks in platinum production, caused by the relatively low prices. The largest platinum reserves are located at the Bushveld Complex in South Africa, which supplies more than 75% of the world’s output.
Meanwhile, the top 5 platinum mining countries include the following:
Mine Production in kilograms
Half of the global demand for platinum comes from Europe, while North America and Japan take 10-15% each. 5% goes to China and the remaining is split across the rest of the world.
90% of the world’s PGM reserves are located in South Africa, making it the key platinum holder. Other 4 leaders include the following countries:
Amount of platinum in kilograms
Platinum is a multipurpose metal with a bunch of unique characteristics, which makes it popular among various industries. However, the list of major applications includes the following:
1. Automobile industry
40% of gross demand for platinum comes from the automobile industry. Since the 1970s, when the air quality laws required catalytic converters on automobiles in order to reduce hazardous emissions, car-makers have been using platinum to produce them.
30% of the global gross demand for platinum comes from the jewellery industry. Its attractive shiny appearance and resistance to tarnishing makes it a popular metal for making rings, bracelets, necklaces and watches.
3. Industrial uses
25% of platinum is used for producing various industrial products, including:
- Oxygen sensors
- Turbine engines
- Spark plugs
- Dentistry equipment
- Anti-tumour agents
4. Investment demand
5% of platinum demand comes from investors. They can buy platinum in the form of coins and bullions to diversify their portfolios and hedge them against possible losses from inflation.