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Platinum Trading with Contracts for Difference
Even though Platinum can be found in meteorites, it is considered to be one of the rarest metals on earth. Platinum is mined and produced in a quantity of 5 million troy ounces. By comparison, the gold industry mines 85 million troy ounces a year, and silver 547 million. Both of these metals are also considered rare. Platinum’s metallic properties contribute to a variety of commercial and industrial industries. The attraction of the metal is in the resistance to high temperatures and it does not oxidize by air exposure. The metal is also useful as it does not react to chemicals and is a wonderful conductor of heat.
The Platinum Market
Around 50% of platinum consumption, perhaps even a little more, goes to the jewelry industry. However, due to high concentration and its components, only in the last decades people learned how to properly melt and use platinum for jewelry. Platinum is also used as an important and almost irreplaceable component of catalytic converters in fuel engines. Other industries such as medicine use platinum, but in much lower figures. Most of the platinum mined nowadays, a little over 80%, comes from Africa. The majority of the rest is divided between Russia and North America. The trading of platinum is global, as it is traded from the New York Mercantile Exchange (NYMEX), through the Chicago Board of Trade (eCBOT) and all the way to Asia with the Tokyo Commodity trade Exchange (TOCOM). The platinum market is open for trading from 22:00 to 20:59 GMT.
Advantages of Trading Platinum CFD’s
- Platinum is an essential component in catalyst converters, with a major reliance on oil trading and environmentally safe energy consumption
- High demand for platinum usage in jewelry. Due to the metals durability and non-reaction when exposed to chemicals, and does not tarnish over time.
- The endless uses for platinum in the use of archival photography, thermometers, electrodes and smaller electronic devices.
- The metal has found its place in the medical arena, where some compounds found in platinum are used in some forms of chemotherapy.
What Affects the Platinum Price?
The special properties of platinum launch this metal into high demand and into diverse industries. With that, these various industries can also have a reduction in the demand of this metal, leaving it exposed, to changes and vulnerable to drops and jumps within the market. The platinum price saw large changes over the years, and there are a few factors that cause changes in its value:
- Comparison with Gold – It is not uncommon to compare the price of platinum to the price of gold. When the financial markets are stable platinum is estimated to be worth about twice the price of gold. However, when the price of gold goes up usually the price of platinum goes down. Often the 2 assets have an inverse relationship to each other – when one goes up the other goes down.
- Rarity as a Natural Resource – As mentioned before, platinum is a very rare natural resource. As such, its price is affected by the supply and demands; meaning the amount of platinum mined compared to the needs for it in the world.
- Industrial Demand – Due to its uniqueness, most of it goes to specific industries. A change in one of them can create major shifts in the platinum value. For instance – as mentioned before, platinum is used in engines. If, as part of the global trend of green energies, companies will reduce the use of motored engines, the value of platinum can drop.
Platinum CFD Trading
Platinum is not traded for the real physical instrument, but for its contract for difference. That means one does not purchase or sell the instrument, but he is able to benefit from the fluctuations in the instrument’s price. Although the trader is not trading on the actual instrument, the broker provides him with the real-time pricing and actions from the “real life” value. Trading CFDs, as opposed to direct trading, has a few advantages:
- Flexibility – Instruments’ values can change within minutes in some cases. If a person owns platinum when its value is $1,700 and suddenly there is a shift in the market and the value drops to $1,300 he will have lost $400 of its value. This is a declining asset which other people are not interested in buying it. However, if he traded its CFD he can simply close his position at any given time. By trading platinum CFD the trader is able to go both ‘long’ and ‘short’ on the trade.
- Leverage – Another reason is as simple as the price. Platinum is expensive, and in order to purchase one unit the trader will have to pay a substantial sum. Trading platinum CFD, however, the trader can employ leverage of up to , and reduce the capital amount he would need.
- Cost Effective – When it comes to a rare and special metal such as platinum, even if one would physically buy it he would need to transport it, maintain it, keep it safe etc. CFDs allows traders to trade on them without all these extra costs and hassle.
Platinum Trading With AvaTrade Australia
Platinum is a unique metal to trade, and not suitable for any trader. However, the benefits of trading it can attract many different traders, and it’s important to trade only with a broker that is fully regulated, with which you know your funds are safe and you can receive fair and good treatment. All those, combined with other features you should look for in a broker,like an easy to use trading platform, are crucial to be able to trade well. AvaTrade offers an array or instruments, trading platforms and top services, allowing you to excel in your trades.
Platinum Trading Main FAQs
- Why should I trade platinum?
Platinum is both rarer than gold, and has more uses than gold, but it often overlooked as a potential precious metal trade or investment. Rather than avoiding platinum, a trading strategy that focuses on platinum can help diversify your portfolio and give you more opportunities within the precious metals markets. Because of its heavy use within the automotive industry platinum can be used as a trade on the strength or weakness of that industry. In fact, the trends in the automotive industry can give strong clues regarding platinum pricing, helping traders make successful trades.
- Is platinum the best precious metal to trade?
Platinum prices have been depressed for some time as environmental concerns have negatively impacted sales of diesel automobiles. That trend is almost sure to continue, with consumers now looking to the future for electric powered cars. By contrast, trading gold and silver have been making gains as the dovish Federal Reserve weakens the U.S. dollar, and geopolitical effects send capital into haven gold. And yet platinum may be the best trade. Just a slight shift in sentiment would be enough to spark a substantial rally in beaten down platinum and make it the best trade of the year.
- What is the best platinum trading strategy?
The best platinum trading strategy is going to depend on the trader’s own tolerance for risk, their available capital, and the type of contracts being used. So, a strategy based on the spread between platinum and other precious metals might be best employed by an experienced trader with a good deal of capital using either options or futures. By contrast a new trader with limited capital is likely to benefit more from day trading CFDs based on technical trading signals. Both are good platinum trading strategies, but they are tailored for each user’s strengths and weaknesses.