What affects the price of platinum?
Platinum is often overlooked by traders in favour of gold and silver. However, once traders understand the unique characteristics of this markets, they often find the prospect of expanding their trading to platinum an interesting prospect.
- Geographically limited supply
Platinum is estimated to be around 15 to 20 times rarer than gold. Around 90% of its global supply stems from Russia and South Africa with high uncertainty regarding the future of this supply. Add in the mix the fact that it requires a lot of energy and capital to acquire a pure ounce of platinum and it is no wonder why supply is one of the main factors determining its price.
With only two countries involved in the process of mining, there is greater opportunity for monopoly-like behaviours, that can have a dramatic effect on the production levels of platinum and hence its price.
- Varied demand
Because of its dual role as a commodity widely used in the automotive industry and a precious metal, demand for platinum is tightly linked with legislation. In the summer of 2017, for examples, the demand for platinum fell as sales of diesel vehicles dropped in certain European countries over speculation that governments will raise costs to owners of diesel cars.
The price of platinum has of course more drivers than just the demand for catalysts in the automotive industry, but it is useful for traders who wish to participate in this market to be aware of the key industry events that can cause negative sentiment towards the precious metal.