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Platinum - Trading with commodities

  • Post category:Commodities
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Precious metals have exerted a great fascination on people since the beginning. This has not changed until today. Gold and silver were once used as a means of payment. Even today, precious metals are considered a "safe haven" from inflation and loss of monetary value. But it doesn't always have to be the classics gold and silver.

Another very valuable, but less noticed precious metal is, among others, platinum. With special platinum CFDs, investors can invest in the expensive precious metal even with small amounts. If you follow a few basic things, you can successfully trade commodities via CFDs.

What is platinum used for?

The white precious metal has some chemical properties that make it versatile. For example, platinum does not discolor even after contact with fire, which makes it a particularly popular material for laboratory equipment. Platinum is also used in the medical field, for example in pacemakers or special thermometers. Even some highly specialized drugs are produced on the basis of platinum compounds. In addition, platinum is used wherever it can quickly become hot: For example, platinum is used as a crucible in the manufacture of glass.

A very classic use of platinum is the production of a wide variety of jewelry. Platinum is a popular material either in its pure form or as an alloy. Even some collector coins are still made of platinum today, such as the Platinum Canadian Maple Leaf. Platinum is even used in space travel, for example in the cladding of certain rocket components. So the applications of the white precious metal are indeed very diverse.

The greatest demand comes from the automotive industry. Here, platinum is used for diesel catalytic converters. A total of 6 grams are needed for a diesel catalytic converter. Although platinum can also be used for this Palladium can be used, but 20 grams of palladium are needed for the same purification performance of the catalyst.

Where are the largest platinum deposits?

The largest suppliers of platinum today are the countries South Africa, Russia and Canada. However, the share of South Africa with over 80% in the annual production is clearly predominant. There are still some classical platinum mines here, from which large masses of the precious metal are extracted. In fact, platinum is found in many places on earth. However, due to the high costs involved, it is only economically viable to mine platinum in very few regions.

The extraction of the remaining platinum now takes place more as a by-product. For example, various components of platinum are produced as by-products in the manufacture of nickel and other non-ferrous metals. These components are then mixed in a special solution and subsequently recovered by means of chemical processes. Research is currently also looking at some other ways of recovering platinum, but these are relatively costly.

Global production of platinum is more or less completely dependent on South Africa. The same is true of the world's platinum reserves. Platinum occurs in the so-called "Platinum Group Metals". This is a group of metals that occur together in clusters. Among them are platinum, palladium, iridium, osmium, rhodium and ruthenium. Accordingly, South Africa also has the highest palladium deposits in the world.

What are the factors influencing the platinum price?

Dollar exchange rate

Basically, platinum is also traded in the reference currency US dollar, just as with gold or silver, the troy ounce is the reference value (31.1 grams). A first factor on the price development of platinum CFDs are therefore the exchange rate fluctuations in the currency conversion, which should be taken into account when you want to trade platinum.

General global economy

Platinum is most frequently used in industrial production. As a result, supply and especially demand are subject to economic fluctuations. In the case of platinum in particular, bottlenecks have a particularly strong impact on prices, since annual production is only a few hundred kilograms - worldwide!

Automotive industry

The largest customer for platinum is the automotive industry. This is because platinum is used in the production of catalytic converters. This sector accounts for about half of the annual production volume. This quickly makes it clear that if the automotive industry is doing badly, the platinum price will also suffer - and vice versa.

Similarly, the price of palladium has an impact on platinum demand and thus the price of platinum. If palladium becomes more expensive, car manufacturers tend to use more platinum in their diesel catalytic converters again - and vice versa.

Dependence on South Africa

As South Africa is by far the main producer of platinum and also has the largest platinum deposits in the world, platinum demand is heavily dependent on South Africa. Political unrest or production stoppages in South Africa can have a serious impact on the platinum price and cause platinum prices to rise sharply.

Does seasonality have an impact on platinum?

It is an exciting question whether the platinum market is subject to seasonal fluctuations. Especially for investors who want to trade platinum, the answer to this question is crucial. However, due to the above-mentioned dependence of the platinum price on various industries, first and foremost the automotive industry, a seasonality can be derived for the platinum price.

Particularly in the northern hemisphere, where the majority of platinum-demanding groups are located, demand for the white precious metal increases especially strongly from around December. In the months before, a tendency for prices to fall can often be observed. The upswing in December often stems from the fact that many suppliers are stocking up their inventories for the coming year. This trend continues into the spring months. However, investors must always keep in mind that prices are largely led by the automotive industry - so in weak years for cars, the platinum price may also develop weakly.

Platinum forecast: How will the platinum price develop until 2025?

Global economic performance has suffered somewhat in recent years. The automotive industry and manufacturers of special equipment have also felt the effects. A good economy would have a positive effect on platinum demand. Technical developments also give reason to hope for rising demand. This is because platinum is also needed for the construction of cars with alternative drive systems (such as hydrogen). This is currently the case in particular for the construction of fuel cells.

On the one hand, the increasing demand for platinum for fuel cells is positive for platinum. However, this reduces demand for catalytic converters for diesel vehicles. These opposing demands should balance each other out overall. Especially since research is also constantly being carried out into alternatives to the expensive platinum. In some areas, platinum is now used, for example, by Palladium replaced.



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Plus500 risk warning: 80% of CFD retail investor accounts lose money.

How to trade platinum?

With many CFD providers, investors can trade various CFDs, including platinum CFDs, between 7:30 a.m. and 10:30 p.m. every day. Often, these are very short-term positions that are closed again within a few minutes or hours.

CFDs are often equipped with leverage. A frequently used leverage is 1:10, for example, which means that if the price of platinum moves by one point in the desired direction, the value of the CFD increases by 10 points. Investors can speculate on both rising and falling prices. However, it should be noted that the possible loss can also be increased by the leverage effect, up to a total loss.

What are the most exciting platinum stocks?

Investors can decide for themselves at which point of the platinum value chain they would like to enter with an investment. Two possibilities will be briefly presented in the following.

Impala Platinum

Impala Platinum Holdings is a mining group from South Africa. Besides platinum, the company also mines other precious metals such as palladium, rhodium and nickel. In a way, an investor speculates here with an investment in the origin of platinum.

Anglo American Platinum

Anglo American Platinum is number 1 in terms of platinum production. With over 2.5 million ounces annually, it is one of the largest platinum producers in the world. In the platinum sector, the company has a market share of approximately 37%. In addition to platinum, Anglo American also produces palladium and, with 1.6 million ounces of this metal annually, is not a small market player.

Advantages of CFD trading with platinum

Trading commodities has many advantages. Unlike the physical precious metal, however, CFD investors do not have to worry about a vault or other storage space. One does not physically own the platinum, but only speculates on the price movements of the metal. In addition, CFDs can also be used to buy and sell larger holdings within a short period of time.

A platinum CFD can also be purchased with a small amount of capital. The standard leverage of 1:10 for commodities set in the EU makes it possible to use smaller amounts of equity capital when trading platinum.

Those who want to trade platinum using CFD trading often also benefit from lower costs. Many providers of CFDs have a transparent and favorable cost structure. Especially if you do day trading, CFDs are very suitable for this. Another advantage of CFD trading are the long trading hours at which trading is possible. 

Conclusion about trading with platinum CFDs

There are many logical reasons to trade commodities. There are just as many reasons for CFDs. The combination of these, i.e. Platinum CFDs, are a promising way to combine the advantages of both sides. Thereby there is the possibility to trade commodities directly via CFDs. But also through an investment in companies that are involved in the value creation, an investor can build a broadly diversified portfolio. So if you like to trade with platinum and would like to try out the possibilities of CFDs, you are well advised with a platinum CFD.

Plus500 risk warning: 80% of CFD retail investor accounts lose money.

Plus500 risk note: CFD are complex instruments and come with the high risk of losing money quickly because of the leverage effect. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.