Platinum History and Key Facts
- Archaeologists discovered traces of platinum in gold used in Egyptian tombs as early as 1200BC.
- It was used by Pre-Colombian Americans combined with other metals such as palladium, rhodium and iridium.
- One of the earliest references to platinum in Europe was from 1557 in the writings of humanist Julius Caesar Scaliger, where is was described as an unknown metal found between Darien and Mexico.
- It was initially seen by some as an impurity in gold, and even in some instances thrown away.
- Today, platinum is a popular metal used in the composition of jewellery, and is also used in catalytic converters in vehicles, and in electronics.
- Platinum is one of the rarest metals, with its annual production totalling just 5% that of gold, and even less compared with silver.
- The total worldwide reserves of platinum are thought to be 66,000 tons. Almost most of this (95%) is located in the Earth’s crust of South Africa. Way behind it are other major countries such as Russia, USA and Canada.
Modern Day Statistics for Platinum Production
The Top Platinum Producing Countries in the World 2016 (statista)
Country – Mine Production (in metric tons)
- South Africa – 120
- Russia – 23
- Zimbabwe – 13
- Canada – 9
- United States – 3.9
- Total of Other countries – 3.4
What Influences the Platinum Market
The price of platinum changes along with its supply and demand during sustained periods of growth and decline. There are numerous factors that may affect the price of platinum, many of which are related to its uses in industry and therefore the demand for the metal:
More than half of all platinum produced is used in jewellery manufacturing. This can leave it highly exposed to changes in buying habits, tastes and consumer demands.
Platinum is an essential component in catalytic converters. Whilst this has ensured an abundant demand for platinum since they became compulsory in vehicles in 1993, new cars are turning to different energy sources and are therefore no longer being fitted with the devices. This will have the effect of reducing the demand for platinum in the coming years.
Platinum is gaining use in photography, thermometers and crucible electrodes for high temperature melting. Again, this increased demand would lead to a change in the price of the metal.
The political stability of the top producing countries can be an important factor affecting price, particularly with such high concentrations in specific countries such as South Africa, which accounts for more than 70% of global production.
How is Platinum Traded?
Futures and options are common instruments used to trade platinum, and are provided by the CME Group, amongst others. The CME Globex product symbol for electronic trading is PL. Each NYMEX futures contract is for 50 troy ounces of the metal, with a requirement for the platinum to be delivered under the contract to be 99.95% pure. The price is quoted in dollars and cents per ounce, with a $5 minimum tick price.
Trades can also be placed on platinum futures on the Tokyo Commodity Exchange (TOCOM).
Prices for the London Bullion Market Platinum (LMBE) are taken from the London Platinum and Palladium Market and administered and distributed by the London Metal Exchange (LME).
Platinum can also be traded as an ETF (exchange-traded fund) on the London Stock Exchange under the ticker symbol PHPT and on the New York Exchange as PPLT.
It can also be traded in the forms of coins and bars with different foundries offering various sizes such as 1oz, 10z and 1kg.
Most Swiss bank accounts offer a service of where platinum can be instantly bought or sold like any other currency. Unlike physical platinum, the customer never owns any actual metal but rather a claim against the bank for a certain amount.
Traders can also invest in spread betting or contracts for difference (CFDs) on the price of the platinum, or can own shares in the mining companies, although it must be noted that these companies may not be exclusively mining for platinum.
Why Trade Platinum with CFDs?
CFDs are convenient for traders wishing to have access to platinum price movements.
Plus500 are just one of the online regulated CFD brokers that offer platinum CFDs. Their contracts are based on the price of the CME futures contract (PL). The minimum unit amount is 40 ounces, and they offer 10:1 leverage (10% margin). The minimum margin required on a buy order at the price of 992.63 is $262.05 (or £203.10). Figures taken from Plus500 on 30/08/2017.
Platinum - IG CFD
Alternatively, regulated broker, IG, also offer a CFD based on the CYMEX traded futures contract. A buy order with a price of 991.1, a minimum contract size of 1 contract, the value of 1 pip at USD 50 and a margin requirement of 2% would require the trader to put down a margin of $991.1 (991.1*1*50*2% =$991.1). Note – live price taken from IG 30th August 2017.
Conclusion
Although platinum prices are volatile, it can be a useful component in a trading portfolio, particularly in times of economic stability. Some of the most convenient ways of trading platinum include futures, ETFs and CFDs.
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