If you are thinking of investing in platinum this article explains the factors that determine the price of platinum; how quality is determined through assaying; the different ways of investing in platinum; and lastly, how the platinum industry is regulated.
What determines the price of platinum?
Platinum is traded on the global commodities market. As it is substantially rarer than gold, it usually fetches a higher price than gold during periods of economic stability.
However, during times of economic crisis, you will quite often see an upsurge in the price of gold relative to the price of platinum, as gold is seen as a safe haven by investors.
Other drivers of price are:
1.Demand from the automotive industry
Platinum is an essential industrial metal with its main application being for automotive catalysts. As the automotive industry is reliant on platinum, car sales are an important driver.
However, there is continual research aimed at reducing reliance on platinum for automotive catalysts, and increasingly other metals such as palladium are seen as very effective substitutes
2. Russia and South Africa pact
Most of the world’s platinum originates in South Africa and Russia. For several years there has been concern that the two states might form a platinum trading bloc similar to that of OPEC.
So far this appears to have been limited to a recent statement that “Russia and South Africa…have the opportunity to promote the growth of the market of platinum group metals through partnership and co–operation,” but this could have a significant effect on platinum prices in the future.
3. Speculation
For example, price is influenced by high volume forward month’s futures contracts. The most significant futures contracts are traded on the New York Mercantile Exchange (NYMEX).
How is the quality of platinum assessed?
Pure platinum supplied to the industry contains less than 200 ppm (parts per million) impurities. Unlike gold, there are no formal purity specifications. The purity is usually determined using atomic absorption spectroscopy and X-ray fluorescence spectroscopy.
However, if you are investing in platinum jewellery, then you should pay careful attention to the hallmarks, of which there should be a minimum of three. These are:
- The maker’s mark: each registered maker has its unique mark
- Assay office mark
- The fineness mark which states the platinum purity. The four standard purities are:
- 850 (85% pure)
- 100 (90% pure)
- 950 (95% pure)
- 999 (99.9% pure)
Different ways of investing in platinum
There are several ways of investing in platinum:
- Platinum metal in the form of bars and coins. Bars are available in various sizes, and examples of platinum coins include the 1oz Isle of Man Noble, the Platinum Britannia and the Platinum maple. Platinum jewellery is a possibility, though there can be a 100% retailer mark–up
- Platinum is traded on the New York Mercantile Exchange and the London Platinum and Palladium Market. For platinum to be saleable in commodity markets, platinum ingots need to bear the official hallmarks certifying their purity.
- Invest in an Exchanged-Traded Commodity (ETC) or an Exchange-Traded Fund (ETF) that is focused on platinum. The options are ETCs that hold platinum in a vault, or alternatively that invest in platinum related derivatives.
- Invest in listed shares of platinum miners and producers. While an investment in this way will give you some exposure to platinum markets, the value of shares will depend on many other factors apart from the price of platinum
- Platinum futures contracts. This can be done through the New York Mercantile Exchange .
What is the role of the World Platinum investment Council?
The World Platinum Investment Council serves to encourage investor demand for platinum by providing investors with the information they need to make sound investment decisions and to work with financial institutions.
Platinum mining process
If you want to learn more about the platinum mining process, then please click here.
