Platinum is a precious metal and an industrial metal at the same time. Platinum prices are mostly responsive to economic supply and demand factors as other non-precious metals. However, since platinum supply is very limited, platinum prices are more volatile than the other industrial metals.
The key factors that may influence prices are the policies in the most important producing countries, in particular, South Africa and the Russian Federation; the size of the Russian stockpile and the economic situation of main consuming countries, like Japan, United States and Europe.
Prices of other precious metals can also play an important role in platinum price discovery mechanism.
The main reference price for platinum is the London Fix, which is considered as the international benchmark. The quotation is done twice a day and most of the deals are based on it. The fixing is transmitted by international press agencies and industrialists and producers all around the world use it as a benchmark.
The fixing procedure is simple: at the beginning of each session, the chairman announces an opening price to members' dealing room, which is then transmitted to members' customers. When the dealers receive the orders from their customers, members declare themselves as a buyer or a seller and state the amount in which they wish to trade.
If the amounts do not balance, prices are adjusted upwards or downwards and the process is repeated. The Fixing price would be the one at which all orders are cleared. The chairman declares when it occurs. Settlement shall be made two business days after the date of the contract.
Platinum Price trends from 1968 to 2012 (US dollars per ounce)
Source: UNCTAD secretariat according to data from Johnson Matthey
After a period of relative stability (between 1991 and 1999), prices of platinum have increased continually until the first quarter of 2008.
This huge rise concerning platinum is basically due to the jewellery sector (more particularly in China and Japan) and to the autocatalyst sector (in accordance with environmental issues).
Compared to previous years, platinum price remained between $ 1,700 and $ 1,900 per ounce during the first eight months of 2011 reaching its peak in August. The average daily price was $ 1721, 7% more than in 2010.
However, since September 2011, following a deterioration in the economic outlook due to the correlation of platinum with gold prices, platinum has lost 22% of its value to achieve a last two years minimum.
Platinum prices compared to other precious metals (US per OZ), 1970-2012
Source: UNCTAD secretariat according to statistics from Datastream
Platinum futures and options are primarily traded in:
• CME Group
• Tokyo Commodity Exchange (TOCOM)
Contracts may be directly consulted in the above mentioned addresses.
The main physical market is the London Platinum and Palladium Market (LPPM).
LPPM was established in 1987 with the purpose of formalizing the informal trade that had taken place on a principal-to-principal basis for many years. London Platinum and Palladium Quotations were expanded and upgraded to full Fixings in 1989.
Worldwide leading organizations in platinum are represented in this market. Platinum market making members quote buying and selling prices for spot delivery.
The movements of these prices respond to supply and demand and the result is a very competitive price. Trading takes place during London and Zurich working hours.
Deliveries normally take place at a vault specified by the member unless both parties agree on other arrangements. There are also storage facilities.
Forward prices are also quoted for specific maturity dates so that producers and industrial consumers may hedge in volatile market conditions.The London/Zurich Good Delivery List is a list of acceptable Melters and Assayers maintained by the Market in order to facilitate trading.