Platinum is a dense, silvery-white precious metal. It is soft, ductile, malleable, and highly unreactive. Platinum is the best known and most widely used of the six platinum group metals (PGMs), which include palladium, rhodium, ruthenium, iridium, and osmium. It is corrosion-resistant, even at high temperatures, so it considered a noble metal.

Platinum futures are perfect for those who want easy and cheap exposure to the platinum market. One platinum futures contract (PL) is equivalent to 50 troy ounces of the commodity, and the price quotation is in U.S. dollars and cents per troy ounce. The minimum price fluctuation is 10 cents per troy ounce or $5.00 per contract.

With an average abundance of approximately 5 μg/kg in Earth’s crust, platinum is one of the rarest elements on our planet. Owing to its scarcity in the Earth’s crust, the annual production is only about a few hundred tonnes. Platinum futures are very popular in the commodity market due to its importance in diverse industrial processes.

Platinum Futures Contract Specifications
Symbol
PL
Exchange
CME (Nymex)
Tick Size
$5
Point Value
$50
Contract Size
‎50 troy ounces
Contract Months
Jan, Apr, Jul, Oct
Trading Hours
5:00p.m. - 4:00p.m. (Sun-Fri) // Regular Trading Hours are between 7:20a.m. - 12:05p.m. and settlement occurs at 12:05p.m. CST
Settlement
physical
Last Trading Day
The third last business day of the delivery month.

Uses of Platinum

As a versatile commodity with a wide range of uses in different industries, platinum futures are widely traded on commodity exchanges. Its usefulness cuts across the following:

Auto industry: Platinum is used by automobile manufacturers to make catalytic converters, which control the emission of carbon from exhaust pipes of diesel-run vehicles. About 40 percent of platinum demand is from the automobile industry.

Dentistry: Due to its inert nature, platinum is used in making dental crowns and certain dentistry equipment.

Other industries: There are several other industrial uses of platinum, such as in oxygen sensors, spark plugs, turbine engines, and others. These account for about 25 percent of global platinum demand.

Jewelry: The lustrous nature of platinum makes it a popular choice in making necklaces, rings, bracelets, and watches. Up to 30 percent of the global platinum demand is for jewelry and ornaments.

Investment: Some investors keep the physical commodity (in the form of coins, ingots, or bars) as a store of wealth. About 5 percent of platinum demand is for this purpose.

The Largest Producers and Consumers of Platinum

Accounting for about 80% of the world’s platinum production, South Africa is, by far, the largest producer of platinum. Other top producers are Russia, Zimbabwe, Canada, and the United States. As regards PGM reserves, South Africa has more than 90 percent of the Earth’s PGM reserves. Zimbabwe, Russia, the US, and Canada are other countries with sizeable PGM reserves.

Europe is the largest consumer of platinum, accounting for about 50 percent of the annual global demand for platinum. North America, Japan, and China also consume a great percentage of the world’s platinum supply. The commodity is traded via platinum futures contracts on the commodity exchanges.

Why Trade Platinum Futures Contracts?

Platinum Futures Trading

Platinum Futures Trading

There are different reasons for playing the platinum futures market. It could be for speculative purposes but could also be a way of hedging against inflation or diversifying investment portfolios. The main stakeholders in the platinum production-utilization chain come to the futures market to manage price risks.

Hedging against price fluctuation: The producers of the commodity may sell platinum futures contracts to protect their businesses from price fluctuations, while the end-users, such as automobile producers and jewelry makers, may buy the contracts to maintain a stable supply of the commodity.

Speculative trading: Aside from the stakeholders, most of the traders in the platinum futures market trade purely for speculative reasons. The speculators try to benefit from the regular changes in the price of the commodity.

Diversifying portfolio: Many investors and fund managers come to the platinum market to diversify their portfolio. By investing in commodities like platinum, these investors are spreading their risk across different asset classes, so if there is a bear market in one asset class, their portfolio won’t suffer a major hit.

Inflation hedge: While paper money loses value due to inflation, commodities appreciate in value when inflation bites hard. Thus, platinum can be used to hedge against inflation. Certain investors buy the physical commodity, such as platinum coins, ingots, or bars, to keep as a store of wealth. In fact, investors account for about 5% of global gross demand annually.

How to Trade Platinum Futures

The New York Mercantile Exchange (NYMEX), a member of the Chicago Mercantile Exchange (CME) Group, offers platinum futures contracts. Through the CME Globex electronic trading platform, the contracts can be traded from any part of the world.

One platinum futures contract (PL) is equivalent to 50 troy ounces of the commodity, and the price quotation is in U.S. dollars and cents per troy ounce. The minimum price fluctuation is 10 cents per troy ounce or $5.00 per contract.

Trading is conducted over 15 months beginning with the current month and the next two calendar months before moving into the quarterly cycle of January, April, July, and October. At expiration, the contract is settled by physical delivery, and platinum delivered under this contract shall have a minimum purity of 99.95%. Traders, who don’t want to take or make delivery of the commodity, can roll over their contracts to the next expiration months.

All you need to do to start trading platinum futures is to create an account with the exchange through a certified commodity broker and deposit the required margin. Platinum futures are leveraged instruments, so you need not have the full dollar worth of the contract before trading it.

In addition to the CME platforms, platinum futures are also traded on the Tokyo Commodity Exchange (TOCOM).

Platinum Futures Strategies

Metal Futures Strategy

Metal Futures Strategy

Finding trading strategies for platinum futures isn’t as easy as finding strategies for more common markets, like the S&P-500. However, upon finding one, you will very likely be rewarded with a trading strategy that fits well into your current portfolio of strategies.

If you want to get some inspiration for building strategies on the metal futures markets, we recommend that you have a look at our edge membership!

Factors That Affect Platinum Futures

There are many factors that can affect the prices of platinum futures, and these are some of them:

The situation in South Africa: South Africa accounts for about 80 percent of the global platinum supply and 90 percent of proven reserves. Thus, socio-political events in the country, such as labor strikes and policy changes can affect platinum supply.

Automobile demand: The automobile industry uses about 40 percent of the platinum supply in making catalytic converters. If demand for automobiles decline or the taste shifts to electric vehicles, the demand for platinum may decline.

Alternative catalytic converters: There are other metals that compete with platinum for use in catalytic converters. Palladium is a typical example.

Platinum Futures Seasonality

Here is a seasonal chart of the platinum futures market:

Conclusion

Platinum is a very rare metal that is considered to be more valuable than gold. It is used in making catalytic converters for automobiles, dentistry equipment, jewelry, and others. Platinum futures are traded on various commodity exchanges, including the TOCOM and the CME Group.

You can find more info about futures market here.

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