How is the Platinum Spot Price Set?

Platinum Spot Price – (n) the theoretical price of 1 troy ounce of platinum available for immediate delivery before being minted into a bullion bar, round, or coin.

When you visit an online platinum bullion dealer website like JMBullion, chances are you will see the live platinum spot price quoted somewhere on the website.

You may ask yourself, “How come all the platinum bullion products sold on the website are not priced at the platinum spot price?”.

What is the platinum spot price, if not the price of platinum itself?

If it were only that simple.

When you look granularly at how platinum’s worldwide spot prices are determined you will find complexity. The main money powers influencing the platinum spot price are not for the most part exchanging the physical precious metal but instead using derivative contracts representing the underlying commodity to determine what the real world physical platinum price ultimately is.

You wouldn’t be strange if you thought this situation didn’t make common sense.

Why would theoretical contracts representing physical commodities dictate the real world price?

Is this not a strange case of the tail wagging the dog?

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Commodities can be goods such as platinum, silver, crude oil, gold, wheat, corn, coffee, soybeans, cotton, palladium, and other items. These commodities all have futures contracts listed on various exchanges throughout the world. The futures price for a commodity is a mixture of contracts priced for future delivery of that particular commodity.

A spot price is the fluctuating market price for an asset bought or sold on commodity exchanges contracted for immediate payment and delivery.

The spot price of platinum is determined by the forward month’s futures contract with the most volume. At times this contract can be the current month or it might be two or more months out in time.

Futures contracts exist to provide commodity producers, end users, and price speculators a way to potentially and respectively manage price risk, buy and take future delivery of goods, or bet on commodity’s price rise or fall.

A futures contract can extend far out in time. For instance, one could buy or sell a futures contract of oil that expires in several years.

The spot price of platinum is traded close to 24 hours a day during week days halting on weekends. The spot price for platinum is mainly derived from exchanges centered in London, Zurich, New York, Chicago, China, and Hong Kong.

Platinum spot price fluctuations today are mostly determined by the NYMEX and COMEX exchanges. The New York Mercantile Exchange (NYMEX) is the most significant futures contract trading market for platinum and consequently it has the most influence on platinum’s fluctuating worldwide fiat currency spot price values.

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The futures contracts for platinum represent the futures price for a lot of 50 ounces of platinum for a future potential delivery date, yet most futures contracts are not settled in the physical real world commodity, merely in cash value. Often times today, 100s of ounces of digital platinum futures contracts are traded on the COMEX for every 1 physical ounce of platinum bullion that is ultimately delivered upon in the real world.

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Since platinum bullion is a tangible asset, and is recognized as a store of value, its fluctuating spot price is typically affected by factors like speculator sentiment, potential price inflation/deflation threats (real or perceived), changing values of digital and paper fiat currencies, fluctuations in government deficits, market/central bank mandated interest rates, and news events.

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Did you know?

Ever since the platinum all time high spot price peak of close to $2,250 oz USD in March of 2008, NYMEX depository warehouse has seen as much as a +400% increase in platinum stocks. That said, total COMEX platinum stocks account for about 3% of the world’s annual 7 million ounce platinum supply (mine and scrap).

Platinum Spot Price in Review

The platinum spot price today remains a composite of the world’s futures markets (mostly the NYMEX) buying and selling futures contracts representing the underlying real world precious metal.

The physical market for platinum bullion items (like the platinum bars and coins JMBullion sells) track the world’s fluctuating platinum spot price but generally platinum bullion product prices hover over the platinum spot price.

In other words, if platinum’s spot price is $2,000 oz USD, you’ll find most bullion products priced above $2,000 oz USD.

The flow from platinum’s spot price to platinum bullion delivered discreetly to one’s door goes like so:

  • Futures traders make leveraged derivative bets on worldwide futures exchanges determining fluctuations in the platinum spot price.
  • Miners dig platinum ore from the ground (mostly as a byproduct as there are not many platinum only producing mines in the world) and then sell mixed ore and doré platinum bars to fine bullion refiners typically pricing their goods just below the world’s platinum spot price.
  • Refiners then melt and purify the ore into fine bullion, which is then sold to mints or bullion dealers at just above platinum’s spot price.
  • Private and gov’t mints also strike platinum bullion coins or pour platinum bullion bars, selling them to platinum dealers at prices typically just above the platinum spot price.
  • Retail bullion dealers (like JMBullion) offer platinum bullion products competitively priced just over platinum’s fluctuating spot price.

We hope this helps your better understand how the platinum spot price is set and determined.
It is certainly not a simple subject nor one most market participants fully understand.

All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.