Hedging Against Falling Platinum Prices using Platinum Futures

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Contents

Platinum Price Today

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Platinum Price in US Dollars

Apr 05, 2020 19:50 NY Time

Platinum Spot Price Platinum Price Today Change
Platinum price per ounce 724.00 -2.00
Platinum price per gram 23.28 -0.06
Platinum price per kilo 23,277.14 -64.30
Platinum price in pennyweight 36.20 -0.10
Platinum price in tola 271.50 -0.75
Platinum price in tael (HK) 879.86 -2.43

Platinum Chart

Platinum Fixes

Platinum Historical Performance

Period Change ($) Change (%)
30 Days -178.00 -19.71%
6 Months -155.00 -17.61%
1 Year -172.00 -19.18%
5 Years -428.00 -37.12%
Since 2000 285.00 64.77%

Platinum Ratios

Commodities Ratios
Gold 0.4472
Silver 50.4881
Palladium 0.3462

Platinum Price Guide

WHAT MAKES PLATINUM A PRECIOUS METAL?

This is a classification of specific metals that are considered rare and have a higher economic value compared to other metals. There are five main precious metals openly traded on various exchanges, platinum has the second smallest futures market. Other precious metals are sometimes referred to as monetary metals, but platinum has never been used as global currencies. However, some investors have seen the precious metal as a store of value in recent history. Along with being a precious metal, platinum is part of a unique subcategory referred to as Platinum Group Metals (PGM). A small amount of PGM metals are used in jewelry but they are mostly known for their industrial uses within the automotive sector.

Most of the platinum produced is used in the auto sector in auto catalytic converters, which are used to reduce emission from gasoline and diesel vehicles.

WHAT IS SPOT FOR PLATINUM?

The spot platinum prices refers to the price of the precious metals for immediate delivery. Transactions for bullion coins are almost always priced using the spot price as a basis. The spot market is trading very close to 24 hours a day as there is almost always a location somewhere in the world that is actively taking orders. New York, London, Sydney, Hong Kong, Tokyo, and Zurich are where most of the trading activity takes place. Whenever bullion dealers in any of these cities are active, we indicate this on our website with the message “Spot Market is Open”. For the high and low values, we are showing the lowest bid and the highest ask of the day.

PLATINUM PRICES – FUTURES MARKET

The platinum is one of a number of commodity futures, wherein contracts are entered into, agreeing to buy or sell the precious metals at a certain price at a specified future date. Platinum futures are used both as a way for producers and market makers to hedge their products against fluctuations in the market, and as a way for speculators to make money off of those same movements in the market.

A precious metals futures contract is a legally binding agreement for delivery of a metal in the future at an agreed-upon price. The contracts are standardized by a futures exchange as to quantity, quality, time and place of delivery. Only the price is variable.

Hedgers use these contracts as a way to manage their price risk on an expected purchase or sale of the physical metal. They also provide speculators with an opportunity to participate in the markets by lodging exchange required margin.

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There are two different positions that can be taken: A long (buy) position is an obligation to accept delivery of the physical metal, while a short (sell) position is the obligation to make delivery. The great majority of futures contracts are offset prior to the delivery date. For example, this occurs when an investor with a long position sells that position prior to delivery notice.

SPOT PLATINUM PRICES VS PLATINUM FUTURES PRICES

There is usually a difference between the spot price of platinum and the future contract prices. The future price, which we also display on this page, is used for futures contracts and represents the price to be paid on the date of a delivery of platinum in the future. In normal markets, the futures price for platinum is higher than the spot. The difference is determined by the number of days to the delivery contract date, prevailing interest rates, and the strength of the market demand for immediate physical delivery. The difference between the spot price and the future price, when expressed as an annual percentage rate is known as the “forward rate”.

CHANGE (CHANGE IN PLATINUM PRICES FROM PREVIOUS CLOSE)

This is the change in the price of the platinum from the previous close, which is not necessarily the previous day. Weekdays from 6:00 PM NY time until midnight the previous close is from the current day. Here’s why: The time the market stops trading in New York on weekdays is for a 60 min period, from 5:00 PM New York time until 6:00 PM. We use the last quote at 5:00 PM as the close of that given day. Change is always the difference between the current price and the price at 5:00pm. For example: Platinum last traded at $1,000 at 5:00 PM on January 17. If it is January 17 at 6:30 PM and the price is $1,002, we will show a change of +2.00. If it is January 18 at 5:00 PM and platinum is quoted at $1,025 then we would show a change of +25.00 at that time.

PLATINUM FUTURES CHANGE (CHANGE FROM PREVIOUS CLOSE)

This is the change in the price of the metals from the price at the end of the previous trading session. Currently, the weekday closing time is 2:00 PM Eastern Time.

30 DAY CHG (30-DAY CHANGE)

This is the change in the price of the metals over a 30-day period as posed from the previous close.

1 YEAR CHG (1-YEAR CHANGE)

This is the change in the price of the metal from a year ago today, as opposed from the previous close.

HOW ARE THE LIVE SPOT PLATINUM PRICES CALCULATED?

Every precious metals market has a corresponding benchmark price that is set on a daily basis. These benchmarks are used mostly for commercial contracts and producer agreements. These benchmarks are calculated partly from trading activity in the spot market.

The spot price for platinum is determined from trading activity on Over-The-Counter (OTC) decentralized markets. An OTC is not a formal exchange and prices are negotiated directly between participants with most of the transaction taking place electronically. Although these aren’t regulated, financial institutions play an important role, acting as market makers, providing a bid and ask price in the spot market.

I’VE HEARD THAT PLATINUM IS TRADED 24/7 – IS THAT TRUE? IS THERE AN OPEN AND A CLOSE?

Like other precious metals, platinum actually trades 23 hours a day Sunday through Friday. Most OTC markets overlap each other; however, there is a one-hour period between 5 p.m. and 6 p.m. eastern time where no market is actively trading. Despite this one hour close, because spot is traded on OTC markets, there are no official opening or closing prices.

For larger transactions, most precious metals traders will use a benchmark price that is taken at specific periods during the trading day.

WHAT IS THE BID PRICE FOR PLATINUM?

The bid price is the highest price someone is willing to pay for an ounce of platinum.

WHAT IS THE ASK PRICE FOR PLATINUM?

The ask price is the lowest price someone is willing to sell an ounce of platinum.

WHAT DOES THE SPREAD MEAN FOR THE PLATINUM PRICE PER OUNCE TODAY?

The spread is the price difference between the bid and the ask price. The platinum market is relatively small and can have a wider spread compared to gold and silver, which are much more liquid markets.

IS THERE A BENCHMARK FOR PLATINUM?

Because there is no official closing or opening price for platinum, some market participants rely on benchmark prices, set during different times of the day by different organizations. These benchmarks are also referred to as fixings.

The London Bullion Market Association (LBMA) is the leading organization that is responsible for maintaining benchmarks for all precious metals. The LBMA Platinum Price are the widely accepted benchmarks in the precious metals space.

The benchmark price is determined once daily in an electronic auction between participating banks with the LBMA, which is administered by ICE Benchmark Administration.

ARE THE PLATINUM PRICES PER OUNCE THE SAME AROUND THE GLOBE?

One troy ounce of platinum is the same around the world and for larger transaction are usually priced in U.S. dollars as that is the most active market; however, the value of an ounce of platinum can be higher or lower based on the value of a nation’s currency. Traditionally, currencies that are stronger than the U.S. dollar have a lower value; however, currencies that are lower than the U.S. dollar have a higher prices. While platinum are mostly quoted in ounces per U.S. dollar, OTC markets in other countries also offer other weight options.

WHAT IS OZ, GRAM, KILO, TOLA, (ETC.)?

Silver and most precious metals prices are quoted in troy ounces; however, countries that have adopted the metric system price gold in grams, kilograms and tonnes.

Grams = 0.032151 troy ounces

Kg = 32.150747 troy ounces

Tonnes = 32,150,7466 troy ounces

Tael = 1.203370 troy ounces

Tola = 0.374878 troy ounce

Though not as popular as kilograms and grams, Tael is a weight measurement in China. The tola is a weight measurement in South Asia.

WHAT IS THE DIFFERENCE BETWEEN AN OUNCE AND A TROY OUNCE WHEN LOOKING AT A PLATINUM CHART?

A troy ounce is used specifically in the weighing and pricing of precious metals and its use dates back to the Roman Empire when currencies were valued in weight. The process was carried over to the British Empire where one pound sterling was worth one troy pound of silver. The U.S. Mint adopted the troy ounce system in 1828.

A troy ounce is about slightly heavier than an imperial ounce by about 10%. An imperial ounce equals 28.35 grams, while a troy ounce is equal to 31.1 grams.

WHY IS PLATINUM MOSTLY QUOTED IN U.S. DOLLARS?

While you can buy platinum in any currency in the world, it is important to realize that ultimately everything is based on the value of the U.S. dollar. Because of the importance of the U.S. economy in the world, the U.S. dollar is considered a reserve currency, meaning that it is held in significant quantities by other governments and major institutions. Reserve currencies are used to settle international transactions. Since the start of the 20th century, the U.S. dollar has been the dominant reserve currency around the world.

WHY ARE PLATINUM AND GOLD PRICES SO DIFFERENT?

The reason platinum prices trade differently to gold boils down to one simple fact: supply and demand. The less supply there is of a metal, the higher the price. Unlike gold and silver, sentiment has little impact on platinum prices. Platinum is considered an industrial metals and has a very structured supply and demand model.

Over recent years, low demand for diesel vehicles – platinum is the main metal used in diesel catalytic converters — has reduced demand for platinum, at the same time annual supply has been relatively stable.

Platinum does also have a small jewelry market but this has little impact on prices.

WHAT IS THE LBMA?

Based in London, the London Bullion Market Association (LBMA) is an international trade association, which represents the precious metals markets including gold, silver, platinum and palladium. It is not an exchange. Its current members include 140 companies made up of refiners, fabricator, traders, etc. The LBMA is responsible for setting the benchmark prices for gold and silver as well as platinum and palladium. For the refining industry, the LBMA is also responsible for publishing the Good Delivery List, which is widely recognized as the benchmark standard for the quality of gold, silver and PGM bars around the world.

WHAT IS THE BIGGEST PLATINUM EXCHANGE-TRADED FUND (PPLT)?

Physically backed-exchange traded funds have revolutionized the investment landscape in the last 15 years and platinum is no exception. These products provided easy access to difficult markets for investors. Among PGM markets, Aberdeen Standard Investment runs the biggest platinum-backed ETF in the world with assets under management valued at $765.2 million.

WHAT MOVES PLATINUM PRICES?

It is important to note that platinum is a fairly small markets so prices can see dramatic fluctuations. However, unlike gold and silver, the platinum has a strong industrial market, which means that it responds to more supply and demand fundamentals. Platinum has seen some renewed demand because car companies have to meet tightening environmental conditions to reduce greenhouse gasses. Auto companies are loading their catalytic converters with more platinum meet these new standards. However even as demand grows, the market still has relatively stable supply leading surpluses.

Platinum price prediction for 2020 and beyond

Denser and rarer than gold, platinum is one of our favourite materials for use in healthcare and car manufacturing. But what is the platinum price forecast for 2020?

Like all commodities, platinum’s price is dependent on a complicated mixture of demand – particularly from industry – and levels of supply in the market.

So what is the platinum price forecast for 2020? In recent times, its industrial applications have seen a fall in demand. There are some suggestions that new technologies, in particular electric vehicles and small satellite manufacture, will require greater quantities of this precious metal in the future.

At its peak, platinum was more than twice the price of gold. So what are the price predictions for platinum in future?

A rocky ride

Historically, platinum reached its all-time high of $2,253 per oz in March 2008, up from its lowest point of $97.70 in January 1972. Its latest peak was in August 2020 when it reached $1,157.97. The most recent platinum commodity price as of December 11, 2020 is $920.13, after starting this year at a level of $799.54.

By past standards, platinum is having a good year. It has increased by over 15 per cent since January. As a vital component in fuel-cell batteries, platinum could be a key component in the electric cars of the future, making up for declines in traditional car manufacturing and a sluggish jewellery market.

Platinum price forecast 2020

Demand for a new generation of cars that use a fuel cell instead of a battery is likely to come in the medium term as the technology takes off. Platinum is also a key component in small satellites, which are increasingly being used by government and industry.

For investors interested in buying the metal, there is short-term uncertainty. Demand for platinum in 2020 is forecast to drop, and there is likely to be a surplus of the metal.

What’s more, the share price of platinum has been languishing for nearly a decade, prior to this year’s better performance. Even in 2020 it has underperformed the two related metals with which it is mined. Palladium and rhodium are produced as by-products of platinum mining, but the price of palladium has jumped 41 per cent in 2020, while rhodium has surged 144 per cent, as both are in high demand for industrial uses.

Uses of Platinum

Platinum is mined in South Africa and has a number of important industrial uses. While it is a scarce metal, more than 20 times rarer than gold, it is used primarily in:

  • MANUFACTURING: According to the World Platinum Investment Council (WPIC), Platinum’s versatility keeps it in demand. Industrial use of platinum has increased nearly fourfold since 1980.
  • HEALTHCARE: Platinum is a biologically compatible metal because it is non-toxic and stable. It does not react with, or negatively affect, body tissue. It is used in surgical instruments, implants, pacemakers and cancer treatment.
  • ENVIRONMENTAL: Platinum’s properties make it critical to reducing air pollution and in the construction of energy-efficient fibreglass.
  • CATALYTIC CONVERTERS: these convert toxic gases and pollutants from internal combustion engines into less-toxic pollutants by interaction with the surface of platinum.

The demand for platinum in the car industry has been hit by falling demand for diesel cars. Petrol cars, which use palladium in the manufacturing process, have become more popular after the EU introduced tighter restrictions on polluting cars and diesels fell out of favour.

In addition the scandal of 2020, when Volkswagen was found to have tampered with diesel-powered vehicles in order to produce better emissions tests, has cast a shadow on the diesel car industry. The platinum prediction is that manufacturers may, in time, decide to use platinum in petrol vehicles rather than palladium, as the latter is now so expensive in comparison. However, this change could take between two and five years to materialise.

Political and economic risk

Almost 75 per cent of platinum is mined in South Africa. These mines have been affected by disputes over pay and working conditions, lack of power and water, and the instability of the rand.

For several years, South African platinum miners have been in the red and their mines have not been particularly profitable. The decrease in the value of the rand compared with other world currencies, coupled with strong demand for palladium and rhodium, have put them back into profit. These days, they are known as Platinum Group Metals (PGM) producers, rather than platinum miners because of the importance of palladium and rhodium in the mining process.

Is platinum a good investment?

is the metal of choice in petrol and hybrid catalytic converters, systems could be re-designed so that platinum could take its place. While the cost to do so would be high, with palladium now costing twice as much as platinum

at over $1,872 an ounce, there may soon be a financial incentive for car manufacturers to make the change.

Platinum price forecast

So, what about the platinum forecast for 2020, and beyond?

Experts are divided on the outlook for platinum. René Hochreiter, a respected analyst with Noah Capital, said earlier this year that the outlook for PGM miners was “better than it has been for many years”.

However, Johnson Matthey’s most recent PGM Market Report suggested that while the outlook for investment, industrial and automotive demand is largely positive, this is less true for the jewellery sector. Young consumers, particularly those in China where the market is growing, are less swayed by the rarity of platinum, and more motivated to buy gold jewellery with attractive designs.

According to a report by RMB Morgan Stanley, platinum’s future price will depend on industrial demand in the long term, rather than investors’ decisions to hold it as an asset as they do with gold. Platinum is less liquid than gold, which also makes it problematic to hold as an alternative asset that is a safe haven and not correlated to the performance of financial markets.

According to the World Platinum Investment Council (WPIC) there has been a recent growth in Indian demand for platinum jewellery and this could put upward pressure on platinum prices in the coming years as India’s economic growth catches up China’s.

Best Platinum ETFs for Q2 2020

PPLT, PLTM, and PGM are the best Platinum ETFs for Q2 2020

Platinum is far rarer and less well-known to investors than other coveted precious metals such as silver or gold, but is also seen as a valuable option for many investors. Platinum, which looks like silver, is a chemical element, precious metal, and commodity all in one that manufacturers use primarily for products such as automobiles, jewelry, and electronics. Investors can gain exposure to platinum by investing in shares of a platinum exchange-traded fund (ETF), which tends to be more liquid than holding the physical commodity itself.

Platinum ETFs may be structured as grantor trusts, a typical structure for funds whose assets are comprised of a single commodity held physically in a vault on behalf of investors. Other platinum ETFs may be structured as exchange-traded notes (ETNs), which are unsecured debt securities that track an underlying index of securities and trade on a major exchange like a stock. Platinum ETNs invest in futures contracts that track the price of the metal, as opposed to holding it in its physical bullion form. While the price of platinum tends to be more volatile than that of gold or silver, platinum ETFs can still act as a hedge against inflation and a safe haven in times of market turmoil.

The platinum ETF universe is comprised of just 3 distinct ETFs, excluding inverse and leveraged ETFs. The best-performing platinum ETF for Q2 2020, based on performance over the past year, is the Aberdeen Standard Platinum Shares ETF (PPLT). We examine these 3 funds below. All numbers in this story are as of March 24, 2020. 

Aberdeen Standard Platinum Shares ETF (PPLT)

  • Performance over 1-Year: -24.9%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 173,981
  • Assets Under Management: $462.8 million
  • Inception Date: January 6, 2020
  • Issuing Company: Aberdeen Standard Investments

PPLT is structured as a grantor trust, 100% physically backed by platinum bullion held in a vault on behalf of investors. PPLT aims to track the spot price of platinum bullion and to allow investors to gain exposure without having to hold bullion directly. 

GraniteShares Platinum Trust (PLTM)

  • Performance over 1-Year: -24.4%
  • Expense Ratio: 0.50%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 36,647
  • Assets Under Management: $7.7 million
  • Inception Date: January 22, 2020
  • Issuing Company: GraniteShares

Like PPLT above, PLTM is structured as a grantor trust, 100% physically backed by platinum bullion held in a vault on behalf of investors. 

iPath Series B Bloomberg Platinum Subindex Total Return ETN (PGM)

  • Performance over 1-Year: -26.7%
  • Expense Ratio: 0.45%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 666
  • Assets Under Management: $3.5 million
  • Inception Date: January 17, 2020
  • Issuing Company: Barclays Capital

Unlike the other ETFs on this list, PGM is structured as an ETN, which invests in futures-based platinum contracts providing exposure to platinum without any physical holdings. 

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