Platinum Spot Price

Platinum spot prices are determined through a combination of supply and demand dynamics in the global marketplace. The spot price represents the current market value of one troy ounce of platinum for immediate delivery. Factors influencing platinum prices include industrial demand for applications such as catalytic converters in automobiles, jewelry demand, economic indicators, geopolitical events, and mining production. The prices are set through trading on various commodity exchanges, with fluctuations influenced by real-time market conditions and investor sentiment. Market participants, including miners, investors, and speculators, contribute to the ongoing price discovery process, responding to a multitude of economic and geopolitical factors that impact the platinum market.

While the COMEX (Chicago Mercantile Exchange) is a major commodities exchange known for its influence on gold and silver prices, its impact on platinum prices is generally considered to be less significant compared to the LPPM (London Platinum and Palladium Market) and NYMEX (New York Mercantile Exchange).

Platinum is a less actively traded metal on the COMEX compared to gold and silver. The NYMEX, which is part of the COMEX, offers platinum futures contracts, and while these contracts contribute to price discovery and trading activity, the overall volume and liquidity in platinum futures are typically lower than that for gold and silver.

The LPPM, on the other hand, plays a crucial role in setting benchmark prices for platinum through mechanisms like the Platinum Fix. This benchmark is widely used in global transactions, contributing to the determination of platinum prices on a broader scale.

In summary, while the COMEX does provide a platform for platinum futures trading, its influence on platinum prices is generally considered secondary to the LPPM and NYMEX. The LPPM's benchmark price and the NYMEX's platinum futures contracts are often more closely watched by market participants for price discovery and risk management in the platinum market.

Platinum and Gold Prices

Some people may trade platinum and gold the way others trade the silver to gold ratio. Historically, platinum has been priced higher than gold, and the historical average of the platinum to gold ratio is about 0.72. In the past decade, gold has surpassed platinum as the money supply has grown dramatically due to federal monetary policies known as quantitative easing. Platinum demand is primarily industrial, while gold’s primary demand is driven by its utility as a financial instrument. While the two metals tend to move together directionally, the fiscal environment over the past ten years has heavily favored the yellow metal. Platinum investors point to its historical pricing in relation to gold as a key point to consider that platinum may either have runway to move up, or gold may have a long way to fall to bring prices back to the historical mean.

Platinum Automotive Use

Platinum has long been anchored by heavy utilization in the automotive industry. Some reports claim over 80% of annual platinum supply goes directly into feeding the world’s need for cleaner transportation via the auto industry. This includes spark plugs, catalytic converters, and other related industries like glass. Catalytic converters (which are required in most civilized countries around the world) are lined with approximately 3 to 7 grams of platinum. This comes out to about 9.6-22% of one troy ounce, which equates to about $96-$224 worth of platinum with a spot price of $996 (spot at the time of writing). This is why auto companies will sometimes look for a platinum substitute when the price begins to rise (like palladium), and why catalytic converters are sometimes targeted by thieves.

Should you be Worried About the Electric Vehicle Revolution?

Some platinum advocates are concerned the EV (electric vehicle) market will reduce long term demand for platinum as EVs don’t have any need for catalytic converters. There are a few reasons this concern may be unwarranted. First is that EVs cannot replace all vehicles on the road. A single fast charger would require 40 acres of solar panels on a sunny day to full charge an EV. The power required to charge a semi-truck within thirty minutes is the equivalent to the power used by roughly 4,000 single family homes (and no such charging technology currently exists to power a truck that quickly, though it is in development). Auto manufacturers are confronted with the reality of electric vehicle economics, as consumers appear reluctant to give up gas vehicles in exchange for one with a higher initial cost, 80% more maintenance issues, range anxiety and lower resale values. Most recently, auto manufacturers have curbed their forecasts and cut the size of future investments to match market demand.

The reality of electric vehicles is they have too many downsides and physical limitations to completely replace our existing infrastructure. However, FCEVs (fuel cell electric vehicles) that are powered by hydrogen, may be a replacement technology for the traditional ICE vehicle. Toyota has long bet on this technology, maintaining a hydrogen car called the Mirai, though they have not promoted it heavily in recent years. FCEVs do use platinum in substantial quantities. Fleet vehicles are leading the adoption of FCEVs as they require no charging, refuel in minutes instead of hours, and provide some built-in unit economics for refueling infrastructure. The infrastructure to power a hydrogen-based auto industry also uses platinum.

Platinum Performance Over Time

Platinum has not had the same amazing growth story that other assets have had, notably declining where gold and silver have flourished. In 2008, platinum spot prices sharply rose and maintained over $2100 per troy ounce, marking an all time high in March at $2290 per troy ounce. This coincided with the collapse of Bear Stearns, though prices had increased steadily since 2001. Once the great financial crisis truly began in earnest, the price of platinum collapsed dramatically for a few months, then rallied until 2011 when it began a gradual decline. For the past several years, platinum has traded between $800 and $1200 per ounce. Platinum’s price performance may change to an upward trajectory if either the supply becomes more constrained or demand changes suddenly.

Platinum's Limited Supply

Platinum has two main supply sources – recycling and mining. Recycling is incredibly important for platinum because of its rarity and the limited number of platinum mines in the world. Platinum is about 30 times rarer than gold and mined at about 1/15 the quantity that gold is.

Approximately 25% of platinum supply comes from recycling operations. The main mining supply is located entirely in South Africa, comprising over 70% of the quantity produced each year from the earth. The concentration of most of the world’s platinum in one small region creates risk. In 2023, South Africa experienced serious electrical grid failures. A shortage of electricity has been an ongoing problem for South Africa since 2007, but it reached a critical point in 2022 when Eksom ran out of funds to purchase diesel. The shortage of power caused the mining operations to shut down temporarily and periodically, which reduced the supply of platinum.

Platinum is a commodity and responds to supply and demand changes like any other. As supply is reduced, the platinum price increases. The 2023 supply deficit is projected to be 1M oz, and consecutive deficits are expected to continue to deepen through 2027.

Never Pay Below Spot Price for Platinum Bullion

All platinum bars, rounds and coins have a premium that is a fixed amount of percentage above the spot price. The premium pays for the mints, mines, retailers and all other organizations within the supply chain. Without a premium, no market for investment grade bullion can exist. Investors should expect to pay a small amount above spot to purchase platinum bullion. If a deal appears to be too good to be true and you think you’ve found a platinum product for less than the spot value, assume it is not real platinum. Fraudsters are known to tempt people with a deal for bullion priced below spot using convincing looking counterfeits. It is wise to treat any offer for platinum bullion priced below spot value with suspicion.