Your Most Comprehensive Guide to Platinum Trading
October 29, 2020 (Investorideas.com Newswire) Platinum was first mentioned in 1557 by an Italian scholar, Julius Caesar, and is one of the most expensive commodities on earth. It is a malleable and ductile metal and part of the larger platinum-group metals, including iridium, osmium, palladium, rhodium, and ruthenium.
Platinum is categorized together with silver and gold as a precious metal. Indeed, it is rarer than gold because only about 130 tons are extracted every year compared to 1,700 tons of gold. Furthermore, the cost of mining a block of platinum is twice as high expensive as gold.
As a rare metal, platinum has emerged as one of the top metals to trade on the market. So, if you are interested in trading platinum, here is your comprehensive guide.
Top Five Platinum Market Brands (Capital.com)
Before looking at the strategies that you can use to trade platinum, it is important to answer the question, “Which are the companies that deal with this precious metal?” Here is a list of the top five players on the platinum market:
1. Anglo American Platinum
Anglo American is the biggest platinum producer and accounts for about 38% of the global supply. The company’s operations are mainly located to the northwest and northeastern parts of Johannesburg, South Africa, as well as the Bushveld Igneous Complex. The company is listed in Johannesburg Stock Exchange (JSE), the South Africa’s largest stock exchange.
2. Impala Platinum
This is another common name on the platinum market. In addition to platinum, the company also produces cobalt, nickel, and copper, and is one of the most significant miners in the North West Province of South Africa. Like Anglo American Platinum, Impala Platinum is also listed on JSE, but its shares are also traded on the London Stock Exchange (LSE).
Lonmin Plc, previously known as the Mining Division of Lonrho PLC, is a British producer of platinum metals operating in South Africa. The company has its headquarters in Johannesburg and is traded on the London Stock Exchange.
4. Norilsk Nickel
This is a Russian Nickel and platinum mining and smelting company with its headquarters in Moscow. The company started its operations around the 1920s, and its operations are mainly based in the Norilsk-Talnakh area in North Russia. Its shares are listed on the Moscow Stock Exchange and London Stock Exchange.
Sibanye-Stillwater is the third-largest producer of platinum and palladium in the world. Furthermore, it is the largest gold producer in South Africa and among the ten largest gold producers in the world. The company is traded on the Johannesburg Stock Exchange and New York Stock Exchange.
Factors that Determine the Price of Platinum on the Market
For most people, especially the new traders, USA 500 and USA 30 are the main stocks of focus when joining the market. Like gold, platinum trading takes place around the clock on the commodities market. Notably, the platinum tends to fetch a higher price per troy than gold. Here are the main factors that drive the price of platinum on the market:
- Platinum is considered an industrial metal, and its biggest demand is mainly from the automotive industry, where it is used as a catalyst to reduce harmful emissions. Others include jewelry, chemical refining, and computer industries.
- Since the automotive industry heavily relies on platinum, its price appears to follow the auto sale numbers. The fast-growing demand for cleaner production by different countries across the globe is expected to push the price of platinum higher in the coming years.
- Since platinum mining is concentrated only in two countries, Russia and South Africa, there is a potential for politically-related factors pushing the price up.
The Best Methods for Platinum Trading
If you want to trade platinum, here are some of the most interesting methods that you should consider:
- Platinum Futures
Futures are derivative products and have the longest history when it comes to metal trading in the exchanges. As a futures trade, you use leverage to purchase contracts that are tied to the price of platinum on the market. If the prices shift downwards, traders put up additional margin in order to maintain their positions.
- Platinum Shares
A more direct method of trading platinum is buying platinum shares, but first, you need to identify a company that deals with platinum. Although not so many companies deal with platinum, you can easily identify the right one by working with the best broker. Here are some tips to help you identify a good platinum trading broker:
- Should have an easy-to-use trading platform for your selected stocks and commodities.
- Multiple deposit and withdrawal options.
- Excellent customer support.
- A large number of companies that deal with platinum.
- Invest in Platinum ETFs
ETF (shortening for Exchange Traded Funds) is a form of investment fund that is traded on stock exchanges. ETFs are like mutual funds in many ways, but differ in that they are traded throughout the day on stock exchanges. In this case, you should look for ETFs that hold platinum as the main asset. Some great ETFs to consider are iPath Dow Jones-UBS Platinum ETN and Sprott Physical Platinum Palladium Trust.
- Trading Platinum Options
Like futures, platinum options are derivative instruments that come with an expiry date. However, options only become successful if the prices reach the predicted price by the expiry date. To trade in an exchange, options traders pay a fee known as premium to the seller in exchanges for the right to implement the options.
- Trade Platinum Bullions
Investors can purchase platinum bullion bars and coins from miners and dealers the same way they purchase silver or gold bullions. For example, you can purchase American Platinum Eagle coins that are 99.95% pure.
Platinum bullions come in different sizes, such as one ounce, ten, and one-kilogram ounce. Note that if you want to physically trade platinum bullions, you need to have special storage units, such as safety deposit boxes.
Platinum is one of the rare earth metals that you can trade in the exchanges today. In this post, we have highlighted the major industries and factors that drive the demand for platinum on the market. However, you also need to ensure you use the right trading strategy and pick the best broker for successful platinum trading.
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