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Platinum trading explained: How to trade platinum

Learn more about platinum trading – from how the market works and what drives the prices, to different types of instruments and trading strategies. Read on to find out how to trade platinum with CFDs on Capital.com.
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Platinum bars 1000 grams pure platinum Photo: Oselote / Shutterstock.com

Platinum trading is the process of buying and selling the metal, or financial derivatives linked to platinum prices, to speculate on the metal’s price fluctuations.

What is platinum trading?

Platinum is one of the most expensive commodities. Along with silver and gold, platinum is a precious metal.

Platinum is a malleable, dense, ductile metal, which forms the basis of the platinum family. Also known as platinum-group metals (PGMs), the group consists of six metals with similar chemical and physical characteristics: iridium, palladium, osmium, ruthenium, rhodium and platinum.

The precious metal is rarer than gold. Miners extract only 130 tonnes of platinum a year, compared to 1,700 tonnes of gold. The cost of mining per ounce is also twice as expensive.

What is platinum trading? Trading platinum involves buying and selling the precious metal, either in physical form or using financial instruments such as stocks, exchange-traded funds (ETFs) or derivatives.

Past Performance is not a reliable indicator of future results.

History of platinum trading

Using platinum as an investment is a relatively recent trend. Although platinum was mentioned by the Italian scholar Julius Caesar Scaliger in 1557, it was not traded as a currency like gold and silver. 

Platinum commodity trading began during the 1950s, when the New York Mercantile Exchange (NYMEX) launched platinum futures contracts as a way for traders to diversify their activity from agricultural products.

But it was not until 1997 that the US Mint launched its first platinum bullion coin. These quickly became the world’s most popular platinum coins among traders and investors.

There are now coins and bullion bars as well as options and futures contracts for platinum trading. 

What is platinum used for?

Aside from an investment instrument, what can platinum be used for? A large part of platinum demand comes from the automotive industry for use in catalytic converters, although palladium has displaced some of that consumption. 

Platinum is also used in fine jewellery. It has uses in industries, including chemicals, petroleum refining, electronics, glass and medicine (surgical equipment, dental apparatus and cancer treatments).

Platinum consumption worldwide on 2021, by industry

Platinum price history

Historically, the precious metal is subject to both investment and industrial demand, which is reflected in the platinum price history. In terms of global supply, South Africa accounts for the majority of platinum production, which has a strong impact on its price.

Platinum production in 2021,by countries

The platinum price chart history shows that the price trended up from the late 1990s to peak at an all-time high of $2,253 per troy ounce in March 2008 at the height of the commodity boom. The price collapsed later in the year as the global financial crisis took hold, trading at $813 by November 2008.

The platinum price graph shows that the metal then rebounded to $1,872 in 2011 as the global economy recovered, but declined to $785.50 in August 2018 on oversupply. The price began to trend higher until January 2020. It then crashed to $586 in March 2020 as traders and investors reacted to the Covid-19 pandemic. 

The platinum metal price climbed above $1,300 in February 2021 as Covid-19 lockdowns disrupted supply in South Africa, while the automotive industry rebounded faster than expected. 

The platinum market was volatile heading into 2022, dropping below $900. It then climbed to $1,153 in March 2022 as Western countries imposed sanctions on Russia, the world’s second largest producer, in response to the war in Ukraine. 

But Covid-19 lockdowns in China, the largest consumer, weighed on jewellery demand and automotive production combined with semiconductor shortages and high fuel prices. The platinum price fell to $843.50 in July 2022 – its lowest level since July 2020.

Platinum historical chart

What moves the platinum price?

There are several factors that drive the direction of platinum prices. The market is influenced by demand and supply, which is highly concentrated and can result in sharp price volatility

Comparison with gold

Platinum is also considered a safe-haven precious metal, and high prices for gold can boost investor interest in the platinum trade. Traditionally, safe-haven assets are often used as a hedge against downward trends in other asset prices. 

Between 1987 and 2008, platinum tended to trade at a premium to gold, but the two metals have switched since 2011. As gold is primarily an investment asset while platinum has industrial utility, investors tend to turn to gold during times of economic uncertainty and platinum during periods of strong economic growth. 

Supply and demand

Platinum is a rare natural resource, so any changes in supply can have a substantial impact on its availability and therefore the price. Demand in the platinum markets is concentrated largely in the automotive and jewellery industries. Trends in these markets have a strong influence on prices. 

China is the largest consumer of platinum for jewellery and a major automotive producer. When demand is high in China, platinum prices can rise, while weaker Chinese demand can cause prices to fall. 

Platinum supply and demand

Geopolitical conditions

The world’s platinum resources are highly concentrated in just two countries: South Africa and Russia. This means that events in either of those countries can affect supply and affect the price. 

For example, Covid-19 restrictions in South Africa in 2020 reduced mining activity and pushed up platinum prices. In 2022 Russia’s invasion of Ukraine resulted in countries imposing sanctions and choosing not to buy Russian platinum, effectively reducing supply of the metal on international markets. 

Jewellery market

Production of fine jewellery accounts for around 24% of platinum demand, according to the World Platinum Investment Council (WPIC). The use of platinum in fine jewellery has grown rapidly in recent years, driven by demand from China. Demand from India is also rising, which could accelerate platinum’s use in jewellery.

Automotive industry

Around 39% of platinum demand comes from automotive production, according to the WPIC, primarily for catalytic converters. Therefore, the automotive industry has a significant impact on the price of the precious metal.

When the auto industry is in good health, platinum prices tend to climb higher. Relatively high prices prompted manufacturers to substitute platinum with palladium. The increasing adoption of electric vehicles (EV) could weigh on platinum’s use in the automotive industry over the long term, as EVs do not need catalytic converters. 

On the other hand, emerging fuel cell technology requires more than twice the amount of platinum than internal combustion engines.

“Including the full potential for platinum for palladium substitution in gasoline vehicles would increase automotive demand by >750 koz in 2024 and more thereafter,” said WPIC.

Industrial application

The use of platinum commodities across a variety of industries, from chemicals to electronics to medicine, accounts for around 27% of consumption, according to the WPIC. 

New uses are emerging in electronics and medicine. As a result, manufacturing activity and economic data can have an influence on platinum prices as investors weigh in the effects on the industrial demand.

Industrial demand for platinum

How to trade platinum

Do you want to learn more about how to trade platinum? There are several different options you can choose, depending on your trading strategy, experience and risk tolerance. 

Different ways to trade in platinum

Platinum CFDs

A CFD is a type of contract between a trader and a broker that allows speculating on a price difference between opening and closing the trade. 

Trading platinum CFDs limits 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 speculate on either the upward or downward future price movement through opening a long or short position

Platinum bullion

If you prefer to trade the physical metal you can buy bullion bars and coins from a platinum trading company, in the same way that you can buy gold or silver bullion. This carries lower risk than using paper derivatives, but requires you to arrange storage and insurance for your metal to be kept safe and protected.

Platinum futures

Futures contracts for platinum (PL) are traded on the New York Mercantile Exchange (NYMEX). With a futures contract, you are speculating on the price for the metal on a specified date in the future. This allows you to hedge against price fluctuations. You can roll futures contracts forward rather than taking delivery of the metal on expiry.

Platinum options

Options are derivatives linked to futures contracts that allow investors to trade platinum without the obligation to buy or sell at expiry. Options contracts agree a strike price at a premium or discount to the current futures contract price. You make a profit if the futures contract price moves toward the strike price, but lose the premium if the futures price moves away from the strike price.

Platinum shares

If you want to invest in the market indirectly by trading stocks, rather than derivatives, you can trade shares in companies that mine or refine platinum. 

Platinum producers refine the commodity as a by-product of mining other metals, so this can diversify your portfolio. But keep in mind that would also increase your exposure to other metal markets that may perform differently to platinum.

There are a few options for how to buy platinum stocks. You can buy and sell platinum shares directly or use exchange traded funds (ETFs), options and contracts for difference (CFDs) to trade.

Platinum ETFs

Some ETFs track prices for platinum metal, while others invest in the shares of platinum producers. 

Trading ETFs gives you the convenience of trading on exchanges while offering more diversification than investing in a single futures contract or company stock. This approach spreads risk across a number of holdings, but also limits the gains you could make from a single platinum stock rallying.

What is a platinum trading strategy?

Before you start trading platinum, you should consider having a well-defined trading strategy to direct your decision-making. There are various types of strategies you can use to stay consistent and avoid panicking during heightened volatility or let emotional biases interfere with your trading.  

News trading strategy

A news trading strategy focuses on opening and closing positions on an asset in response to news developments such as geopolitical events, government policy statements and the release of economic data. 

Following the news trading strategy, a trader would have bought platinum at the start of Russia’s invasion of Ukraine and sold when the price rallied on concerns about the impact on global platinum supply. 

Spread trading strategy

Spread trading involves buying a futures contract and selling another futures contract against it. There are different types of spread trades, as you can trade calendar spreads – opening a long or short position on one futures contract and then opening the opposite position on another futures contract, for another month. 

Alternatively, you can trade spreads between markets, such as platinum and gold. Spreads can be less volatile than outright futures, making it easier to identify extended price trends and implement a technical trading strategy.

Swing trading strategy

Swing trading involves holding a position open for several days or weeks to profit from price swings. Note that the asset price could go against your position, which may trigger losses. Swing traders use technical analysis tools to identify when prices are likely to change direction and then buy or sell platinum accordingly.

Trend trading strategy

Trend trading is also known as position trading. Platinum trend traders use technical analysis to identify whether the price is in an upward or downward trend. 

If the price is trending higher, platinum traders will buy the metal until the technical indicators point to the trend coming to an end. If the platinum price is trending lower, they will sell or go short until the trend turns upward.

Day trading strategy

Day traders use technical analysis tools to identify price trends so they can buy and sell within a single trading session. Day traders close their positions before the end of the session to avoid overnight trading fees as well as exposure to overnight market developments that could change the direction of the price when the market reopens.

How to trade platinum CFDs

CFDs are instruments suitable for taking short-term positions on commodity markets like platinum. If you want to start trading CFDs for platinum, sign up for an account with a CFD provider like Capital.com. You can trade platinum CFDs along with other commodities, stocks and exchange traded funds (ETFs) in the same trading account.

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Follow these steps to get started:

1. Create and login to your CFD trading account

2. Choose which type of platinum instrument you want to trade CFDs on

3. Use your preferred trading strategy to identify potential trends

4. Open your first trade and consider using risk management tools such as a stop-loss order

5. Monitor your trade using technical indicators and fundamental analysis

6. Close your position when your trading strategy indicates

Pros and cons of trading platinum CFDs

Platinum CFD trading saves you the inconvenience of buying and owning physical metal, which you need to take delivery of and store safely. With CFDs, you have the flexibility to trade the platinum market in both directions. Whether you have a bullish or bearish view of the platinum price, you can speculate on either upwards or downward future price movement.

Trading platinum using CFDs is a cost-effective option as it is often commission-free, with brokers making a small profit from the spread - and traders trying to benefit from the overall change in price. However, CFDs are subject to overnight fees, if you prefer to keep your trade open for more than a day.

In addition, CFDs use leverage so that you can take a large position with only a small initial investment. This is especially useful for expensive assets like platinum. Please note that leverage magnifies both profits and losses.

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.

Platinum trade example

However, you should be aware that trading CFDs also carries risks as they are leveraged products that multiply the size of losses if the price moves against your position, as well as maximising gains if the price moves in the same direction. It is important to do your own research and understand how leverage works before you start trading CFDs.

Why trade platinum with Capital.com?

Advanced AI technology at its core: A personalised news feed provides users with unique content depending on their preferences. The neural network analyses in-app behaviour and suggests videos and articles that fit your investment strategy. This will help you to refine your approach when you trade platinum CFDs.

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. Keep in mind that CFDs are leveraged products, which means both profits and losses can be magnified. 

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 price. A CFD trader can go short or long, set stop and limit losses and apply trading scenarios that align with their objectives. CFD trading is similar to traditional trading in terms of its associated strategies. However, CFD trading is usually short-term in nature, due to overnight charges. Plus, there are extra risks associated with leverage as it can magnify both profits and losses.

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.

Sign up at Capital.com and use our web platform or download the investment app to trade CFDs on the go. It will take you just three minutes to open an account and view the world’s most traded markets.

Platinum trading hours

Platinum market trading hours are around the clock, as the metal is traded on the NYMEX, the Chicago Board of Trade (eCBOT) and on the Tokyo Commodity Exchange (TOCOM). The market is open for trading from 22:00 GMT to 20:59 GMT.

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.

If you choose to trade CFDs, platinum trading hours on Capital.com are as follows:

Monday to Thursday, 00:00 – 21:00 and 22.05 – 00.00

Friday, 00.00 – 21.00

Sunday, 22.05 – 00.00

FAQs

How can I trade platinum?

There are several different ways you can trade platinum. You can buy the physical metal in the form of bullion bars and coins, you can use derivatives instruments such as futures, options, or CFDs, or you can invest in stocks and ETFs. Once you have decided how you want to trade platinum, you may choose a trading strategy to help you enter, exit and manage your positions.

What is the best time to trade platinum?

The best time to trade palladium will depend on market drivers like economic news and political events, which drive market volatility. The market is open 24 hours a day, six days a week.

Is platinum a good investment?

Platinum is a volatile commodity that sees sharp price fluctuations, which create opportunities to generate profits. However, this also carries the risk of heavy losses. Whether platinum is a good investment for you will depend on your trading experience, risk tolerance and how much money you have to invest.

How do I invest in platinum?

Once you have chosen which type of trading instrument to use – physical metal, derivatives, stocks, etc – open an account with a dealer, broker or other provider and use your preferred trading strategy to decide when to buy or sell. You can day trade platinum to try to make a profit from short-term price fluctuations or invest in stocks and funds to benefit from long-term price trends. Note that platinum, as well as other commodities, is volatile and its price can go against your position. This could cause losses.

What is the highest platinum has ever been?

The highest ever price for platinum was $2,253 per troy ounce reached in March 2008 at the height of the commodity boom.


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