How to invest in platinum
The precious metals quoted on the financial markets are excellent assets for individual investors as they offer numerous advantages and enable a good diversity of investments.
But apart from gold and silver there is another precious metal that is highly sought after by traders due to its volatility and high liquidity, as well as its rarity; platinum. Little known by the general public this precious metal generates millions in profits every year throughout the world.
To understand how it is possible to make money by speculating on the price of platinum here is some basic information and explanations about platinum trading together with its indicators and historical details on the trading markets.
General presentation of platinum:
Although little known, platinum is however a highly sought after precious metal. It is even rarer than gold with only a little more than 6 million ounces produced per year. Platinum is quoted in American Dollars per ounce with an ounce representing just above 31 grams of platinum. However, you can find the price quoted in Euros per ounce on certain charts.
The countries that produce the most platinum are mainly South Africa and Russia although the amount extracted in the mines amounts to 12 times less than that of gold.
As with other metals, zinc for example, platinum is mainly used by the Automobile industry that purchases nearly 60% of the global production. It is used in the composition of catalytic convertors. Another smaller part of this amount produced (20%) is used in the jewellery sector.
Platinum is a highly priced metal considered as one of the precious metals due to its rarity.
The production and use of platinum:
Platinum is classified in the precious metals category, together with gold or silver, with the difference that this is much rarer than the other two with an average of only 6.5 million ounces produced per year.
The production, or rather the extraction, of platinum is mainly carried out in South Africa and Russia.
The uses of platinum are numerous and concern mainly the industrial sectors, principally the automobile industry, which alone uses nearly 60% of the market reserves for the manufacture of catalytic exhausts. Another part of platinum production is of course used by the jewellery sector.
But platinum is also exchanged on the financial markets, such as London, where it is priced in dollars per ounce or euros per ounce. It is also priced on the LPPM market (London Platinum and Palladium Market).
Of course, the London market is not the only one that makes it possible to speculate on the price of platinum as it is possible to trade it on an international level thanks in particular to long term contracts, accessible to individual investors via the Internet. It is mainly the TCE or Tokyo Commodity Exchange that manages the majority of the platinum contracts with no less than 10 million transactions per year. One also finds this type of contracts on the NYMEX markets (New York Mercantile Exchange) and the MIDAM (MidAmerican Commodity Exchange of Chicago).
The Platinum quotation:
Platinum is quoted on the stock exchange in the London Market that is also responsible for the quoting of Paladium. This is the LPPM (London Platinum and Palladium Market). The quote is only updated twice per day.
The indicators to follow for platinum trading:
To speculate profitably in the financial markets or trade in platinum you should know the indicators you need to follow. Here are the major ones to monitor:
- The export policies of the two major producing countries
- The economic situation of the importing countries
- The performance of the automobile industry
- The value of the American Dollar against other currencies
Several factors can have an important influence on the price of platinum and it is therefore recommended to know them to determine which way the trend will go.
Among these factors, the most important are those relating to the stocks and of course the demand and the supply figures, but also the policies conducted by the two countries producing the most platinum and particularly South Africa which provides nearly ¾ of the world’s platinum.
Of course, to anticipate the demand volume, it is recommended to also follow the economic situation of the importing countries and so the consumers. These countries are mainly Japan, the United States and some European countries such as France or Germany which are mainly relative to the automobile industry sector.
The results and demand of the automobile sector strongly influence the price of platinum, especially relating to the companies that manufacture ecological vehicles and so use catalytic exhausts.
In the past, it is possible to note a rise of the price when the automobile industry sector was flourishing, then a fall in the price when this sector experienced a regression and therefore a decrease in the demand as was the case in 2008.
It is also recommended to take into consideration the impact of the rise in the price of platinum on demand because, after a major rise, one can often witness a lower demand from the jewellery sector and a substitution attempt from the automobile producers.