The platinum price basics
The platinum price reflects the demand and supply for this precious metal that is used both in industrial applications and as an investment commodity stored in vaults for the long term by individual investors or by a platinum ETF.
While the much better known precious metal gold has relatively few uses in industry, platinum has a number of chemical properties that make it ideal for many major industries. Because of that, the platinum price isn't fueled almost entirely by speculation, in the same way as gold, but mainly depends on demand from industry.
For that reason, platinum is the most volatile of the precious metals.
A rare and precious metal
Platinum is tracked around the clock on the commodity markets around the world. In periods of relative stability on the political and financial fronts, it is normally valued well above gold. That's because platinum is extremely scarce. It is rarer than gold, and there is much less of the metal mined than gold each year. All the platinum that exists in the world would fit inside a cube with 6.3 meter (20 feet) sides. In comparison, all the gold ever mined would fit inside a cube 25 meters (82 feet) to a side.
Mining platinum
Platinum mines are mainly found in South Africa and Russia. The largest reserves are located in the South African Bushveld complex. Because of this concentration of resources, the potential for cartel-like activities and manipulation of the price is considerable. These actions may serve to support or increase the price of platinum.
Platinum is one of the rarest elements in the crust of the Earth. In 2010, a little over 6 million ounces of platinum was mined. Around 24% of demand is met by recycled platinum that has been used for industrial purposes, mainly in catalytic converters. This percentage is expected to increase as more cars are scrapped and the demand for platinum increases.
The price of platinum from 2000 to 2012. It is highly volatile. Note the dramatic drop in 2008, as the car industry struggled.
Fluctuations in the platinum price
In periods of relative stability, platinum is highly valued and trades for considerably more than gold. During more turbulent times, buying gold is perceived as a way to hedge against uncertainly, and as the price of platinum is mainly due to industrial demand, it decreases in price. Over the last decade, platinum has seen a high of $2300 and a low of approximately $400 an oz.
Uses of platinum
Platinum ETFs
A platinum ETF allows investors to invest in platinum without having to own physical meta. Platinum ETFs account for about 40 metric tons of platinum, and is metal that's stored as a pure investment. This is an increase of over 6% since last year.
Industrial uses of platinum
Because platinum is an excellent catalyst in many chemical processes, it is extensively used in catalytic converters in cars. These are devices placed in the exhaust system that reduce the harmful emissions from combustion engines and convert them to less damaging substances.
The automobile industry absorbs more than half of all the platinum that's produced each year. That demand is predicted to rise as the auto industry recovers from the recent crisis. Automakers will spend around $7 billion on platinum in 2012, which is 17% more than in 2011, and thus the most used since 2007. This development is in spite of some automakers buying recycled platinum and using more palladium for the same purpose.
An interesting factor for the future price of platinum is the use of platinum in fuel cells. A market for fuel cell-powered cars is expected to develop over the next decades.
In addition, platinum is utilized in electrodes, batteries, disk drives, monitors and many pieces of electronic equipment.
The chemical industry and petroleum industry also buy platinum.
The industrial uses of platinum is where the majority of demand will arise. See more about that here: Platinum price in the future.
Platinum jewelry
As a precious metal, platinum is increasingly in demand in the form of jewelry. In Asia especially, platinum jewelry is popular. It the time of this writing, more that a third of the demand for the metal is fueled by the demand from the jewelry industry, and 75% of that demand comes from Chinese consumers.
In some parts of the world, specifically China and India, consumers consider platinum on par with gold as a desirable metal for jewelry.
Holdings of platinum as a physical metal
It is possible to buy platinum in bars, ingots and coins and store it in a bank vault or at home. This is somewhat cost-intensive compared to investing in platinum in other ways. Only a tiny percentage of the annual production of platinum is used for buy-and-hold purposes.
Find out more about the platinum price in the future.