Even though Platinum can be found in meteorites, it is considered to be one of the rarest metals on earth. Platinum is mined and produced in a quantity of 5 million troy ounces. By comparison, the gold trading industry mines 85 million troy ounces a year, and silver 547 million.
The Platinum Market
Around 50% of platinum consumption, perhaps even a little more, goes to the jewelry industry. However, due to high concentration and its components, only in the last decades people learned how to properly melt and use platinum for jewelry. Platinum is also used as an important and almost irreplaceable component of catalytic converters in fuel engines.
Other industries such as medicine use platinum, but in much lower figures. Most of the platinum mined nowadays, a little over 80%, comes from Africa. The majority of the rest is divided between Russia and North America.
The trading of platinum is global, as it is traded from the New York Mercantile Exchange (NYMEX), through the Chicago Board of Trade (eCBOT) and all the way to Asia with the Tokyo commodity trading Exchange (TOCOM). The platinum market is open for trading from 22:00 to 20:59 GMT.
What Affects the Platinum Price?
The platinum price saw large changes over the years, and there are a few factors that cause changes in its value:
It is not uncommon to compare the price of platinum to the price of gold. When the financial markets are stable platinum is estimated to be worth about twice the price of gold. However, when the price of gold goes up usually the price of platinum goes down. Often the 2 assets have an inverse relationship to each other – when one goes up the other goes down.
As mentioned before, platinum is a very rare natural resource. As such, its price is affected by the supply and demands; meaning the amount of platinum mined compared to the needs for it in the world.
Due to its uniqueness, most of it goes to specific industries. A change in one of them can create major shifts in the platinum value. For instance – as mentioned before, platinum is used in engines. If, as part of the global trend of green energies, companies will reduce the use of motored engines, the value of platinum can drop.
Platinum CFD Trading
Platinum is not traded for the real physical instrument, but for its contract for difference (CFD). That means one does not purchase or sell the instrument, but he is able to benefit from the fluctuations in the instrument’s price. Although the trader is not trading on the actual instrument, the broker provides him with the real-time pricing and actions from the “real life” value. Trading CFDs, as opposed to direct trading, has a few advantages:
Instruments’ values can change within minutes in some cases. If a person owns platinum when its value is $1,700 and suddenly there is a shift in the market and the value drops to $1,300 he will have lost $400 of its value. This is a declining asset which other people are not interested in buying it. However, if he traded its CFD he can simply close his position at any given time. By trading platinum CFD the trader is able to go both ‘long’ and ‘short’ on the trade.
Another reason is as simple as the price. Platinum is expensive, and in order to purchase one unit the trader will have to pay a substantial sum. Trading platinum CFD, however, the trader can employ leverage of up to 10:1, and reduce the capital amount he would need.
When it comes to a rare and special metal such as platinum, even if one would physically buy it he would need to transport it, maintain it, keep it safe etc. CFDs allows traders to trade on them without all these extra costs and hassle.