Platinum CME Futures Contract
The CME (Chicago Mercantile Exchange) platinum futures contract, reflects the value of platinum that is 99.95% pure and physically delivered to a CME regulated warehouse. According to the CME web site, the contract represents 50 troy ounces of platinum. Platinum that is deliver can take the form of a homogeneous cast plate and/or ingot, with a weight tolerance of 10% either higher or lower. Each contract that is delivered may consist of “more than one piece of plate and/or ingot, with no individual piece weighing less than 10 troy ounces, or the equivalent weight in grams.“
Platinum is considered a precious metal, but it has many industrial uses and while used to create jewelry. Platinum is sought after because of its resistance to corrosion and its ability to catalyze reactions, especially in the refining of crude oil into gasoline. Platinum is essential in a variety of laboratory and industrial applications. The catalytic converter, a vehicle emissions control device, is the most widely used application of platinum group metals. Jewelry is the second largest sector of PGM demand.
The CME Platinum futures contract trades in dollars per troy ounce. Each contract contains 50-troy ounces. Trading in Platinum futures is regularly conducted in the next 3-calendar months, as well as March, June September and December going out for 15-months. The exchange determines the number of months that are available for trading. The minimum price move is $0.10 per troy ounce which is equivalent to $5. Trading is open for business from Sunday – Friday 6:00 p.m. – 5:00 p.m. with a 60-minute break each day beginning at 5:00 p.m., according to the CME web site. Trading in the current contract terminates on the third last business day of the delivery month.
The majority of platinum that is delivered to a regulated depository, the warehouse will generate an inspection that is made by an assayer or a producer of platinum. The Depository shall, upon receipt of the commodity, cause an inspection to be made by an Assayer or a Producer. The Assayer or Producer shall issue Assay Certificate(s) covering each piece in the contract in the form approved by the Exchange. Each Assay Certificate shall report the lot or bar number, weight, grade, the name of the Assayer or Producer, the symbol identifying the metal or the name of the metal and the date of inspection. On all Assay Certificates, weight shall be expressed in troy ounces.
The delivery of physical platinum can take place on any business day beginning on the first business day of the delivery month or any subsequent business day of the delivery month, but not later than the last business day of the current delivery month.
How to Trade Platinum
Platinum trades like a precious metal and is generally highly correlated to both gold and silver. The price, is quoted in U.S. dollars, and therefore is subject to the volatility generated by the global forex markets. Generally, when the dollar is increasing in value, platinum prices are declining, as well as vis versa.
Changes to monetary policy, that will either increase or decrease the value of the U.S. dollar, is watch carefully by platinum traders. With U.S. treasury yields at historic lows, traders will be watching future decisions by the Federal Reserve. Supply and demand also play a large role in price movements of platinum. Enhanced demand for jewelry and robust demand for cars, can lift the price of platinum. Both the United States and China are seeing robust increases in car sales which will drive up the demand for platinum.
The number of contracts that are held by different types of traders are also reported by the Commodity Futures Trading Commission. Investors should analyze the number of outstand contracts held by managed money, which can help determine where the managed money is trading.