Platinum Trading, Commodities & Markets
Platinum is a metal that is a silvery-white in colour. It is considered to be a precious metal, thirty times rarer than gold, and until recently in human history has been very difficult to implement in any practical fashion, due to the difficulty metal smiths faced in tempering it. Previously it had to be mixed with iridium in order to be mouldable, but this changed in the 20th century with the advent of new metal-smithing techniques: this new ease of means platinum now has many of the qualities necessary for inclusion in the global commodity trading system. Platinum has incredibly high temperature resistance, and has highly rated electrical properties. It also does not oxidise on contact with the air.
Platinum, as a precious metal, obviously has significant appeal. It is one of the rarest metals in the world, and is only found in its pure form in two geographical regions: South Africa and Russia. Despite its rarity, platinum is still considered to be an extremely useful substance, so the demand for it is always increasing. This will allow traders of commodities to accrue huge profits if they monitor platinum prices successfully.
Platinum is traded primarily on the New York Mercantile Exchange (NYMEX), as well as the Tokyo Commodity Exchange (TOCOM). At NYMEX, platinum futures are traded at open outcry under the ticker symbol of PL, and are traded electronically under the ticker symbol of EPL.
The main consumer market for the platinum commodity is the jewellery market, which accounts for approximately 51% of the global platinum consumption. Platinum is also used in the automotive industry, as a key component of catalytic converters and as a catalyst in fuel cells. It is also gaining prominence as a component of chemotherapy in the battle against cancer, and can be seen in other hospital equipment such as thermometers and electrodes. A share of the consumer market is also devoted to petroleum refining, so it is clear that platinum is a multi-faceted material. Japan and the United States are the main consumers of platinum globally, with Japan consuming approximately 85% of all the platinum jewellery that is produced.
Around 80% of the world supply of platinum originates from South Africa, with the rest mostly residing in Russia. A small quantity can be found in North America, but this only accounts for 6% of the global share.
With platinum being so rare and yet so useful, platinum trading is contingent on several factors that influence the price of platinum futures. The platinum price (particularly the platinum futures price) is most affected by the increasing demand for the metal, which shows no sign of abating. When this is combined with the difficulty in procuring platinum due to limited geographical areas from where it can be mined, it is easy to appreciate why the price of platinum options and futures is generally so high. The platinum market can be a volatile one however. With so much platinum tied up in the consumer goods market, the price of platinum options can be affected by consumer trends with regard to jewellery. If platinum jewellery falls out of favour, the price of platinum could drop considerably. The potential for loss or gain is massive in platinum trading, and for this reason it is often mesmerising to market traders.
Another factor that affects the platinum price is the price of palladium, a precious metal with similar qualities: it is suitable as a substitute for platinum in many areas of use.