Trading platinum using CFDs

In our daily reports, we comment on the background and outlook for the gold price, but from time to time we refer to other precious metals. One of these that can be traded using CFDs is platinum, and various contracts are available, as well of course as companies with interests such as Johnson Matthey and Aquarius Platinum, which have long appealed to stock market investors.

The metal itself

As gold is rare than silver, so platinum is around 35 times rarer than gold and is less widely found. Its main exploration areas are South Africa and Russia, and then Zimbabwe, Canada and South America.

Less than 90 tonnes of platinum are turned into jewellery, compared with 2,700 tonnes of gold, and it takes eight weeks and ten tonnes of ore to produce an ounce of platinum, against three tonnes mined to produce the same amount of gold. The current price (as shown by the January 2008 CFD) is $1401 per ounce, which is very close to an all time high.

Uses of platinum

Platinum has several unique properties which have led to its increasing industrial use, aswell as for jewellery. It is found in the automotive, aerospace, electronics and chemical industries, most notably in catalytic converters, where Johnson Matthey is a world leader.

It also has major uses in medicine, as it is not affected by the oxidisation reaction with blood. It has excellent conductivity, and is compatible with living tissue, making it ideal for use in pacemakers.

Its density makes it more durable than many other metals, and is extremely inert, being resistant to heat and acids with a melting point of 1,768ºC.

From a jewellery standpoint, the metal does not wear away, and although it can scratch, this is simply a displacement of the metal with no volume lost, which is not the case for gold.

Despite its super strength and density, platinum is highly pliable, and one gram can be drawn to produce a fine wire over a mile in length.

The outlook

Platinum is enjoying a major bull market in line with the rest of the precious metals sector. The usual supply demand arguments apply, with the long lag in developing new mine capacity being one of the main reasons why the sector is expected to continue to be rerated, aswell of course of the simple rarity value in a world of expanding demand.

From that demand point of view the outlook remains extremely positive, and the three biggest markets are now China, Japan and North America.

The bridal sector is an important market for jewellery, as in Japan platinum is still used in almost all engagement rings and over 80% of wedding rings. In the USA, platinum’s share of the bridal market was non-existent twenty years ago, but is approaching 50% now.

Fuel cell technology

There has been a dramatic interest in fuel cell technology mainly as a result of increasing concerns about environmental degradation. Fuel cells do not burn fuel, which eliminates the air pollution associated with fossil fuels.

Almost all prototype fuel cell vehicles are powered by the proton exchange membrane fuel cell, which uses platinum as the primary catalyst, and all major automobile companies have expanding fuel cell programmes.

Demand is so far quite small, but the expectation is for gradual medium to long term growth, first in stationary fuel cells and later with the commercialisation of fuel cell vehicles.