Platinum

Accumulation/Distribution Indicator - A/D Definition and Uses

What is platinum?

Platinum is a chemical, a precious metal, and a commodity that manufacturers use primarily for jewelry, electronics, and automobiles. It appears on the periodic table of the elements with the symbol Pt and the atomic number 78. Platinum futures contracts are commodity contracts traded on the CME COMEX futures exchange (under the symbol PL) and the Tokyo Commodity Exchange . It is also possible to invest in platinum by purchasing shares of an exchange-traded fund specializing in the product.

Understanding platinum

The Spanish general of the navy and scientist Antonio de Ulloa introduced platinum in Europe in 1735. Due to its silver or white appearance, Ulloa named the metal plantina, which means little money. Today, platinum is mined in South Africa, which accounts for around 80% of world production. Russia is the second largest producer in the world. About half of the platinum extracted goes into jewelry, where it is desirable because it has a silvery color but does not tarnish. Platinum is also stronger and more durable than gold.

Key points to remember

  • Platinum is a metal used in jewelry, automobiles and electronics.
  • Platinum is much stronger and rarer than gold.
  • Traders can buy and sell platinum futures, while investors can participate with ETFs that specialize in the product.
  • The price of platinum has been trending downward since the 2007-2008 financial crisis, as investors showing increased interest in other metals such as gold and South African mines have significantly increased their production of platinum.

In the United States, platinum engagement rings are a popular alternative to white gold engagement rings, which are made of gold, alloys, and a rhodium plating that gives them a white appearance. But rhodium fades over time, requiring the replacement of white gold rings, while platinum rings retain their luster for longer periods.

The automotive industry uses platinum for catalytic converters, which can help reduce the toxicity of gases and pollutants in the exhaust gases created by an internal combustion engine. Platinum and other platinum grade metals in catalytic converters have led to a secondary market for scrap converters, which scrap companies will buy to extract the metal for resale. The metal is also used in thermometers, laboratory equipment, electrodes and dentistry equipment.

Platinum is one of the most precious elements in the world, 15 to 20 times rarer than gold (based on annual mining production), and considered one of the most expensive precious metal products. However, while platinum has traded at a significant premium over gold for decades, this has not been the case since 2008; the weak global economy has dampened demand for precious metals, but investor discomfort with the revival of central banks and other economic issues has pushed up the price of gold.

Since the 2007-2008 financial crisis, platinum has generally performed less well than other metals such as gold, silver and palladium. Market watchers believe that a collapse of the platinum markets in 2008 moved the investment class further from the metal, leaving the automotive and jewelry industries as the sole source of demand for platinum. In addition, South African mines have significantly increased platinum production since 2020 and added to the global supply.

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