What Factors Determine the Price of Platinum?

There are many factors that determine the price of platinum, which is a much rarer metal than either gold or silver. The relatively low supply of the metal means that it is usually accompanied by a high price, but the price is still relatively volatile, meaning that it can fluctuate significantly. Overall economic strength usually correlates to the price of platinum, because people with money to spend can afford to invest in the pricey metal. Platinum prices often rise and fall in conjunction with the fate of the auto industry, which uses the metal to produce catalytic converters for automobiles, and are also affected by conditions in the few places in the world that dominate platinum production.

Investors in platinum should be acutely aware of the factors that affect the price of platinum. It is important to note that there is a relatively small supply of platinum in the world, at least in comparison with gold and silver. As a result, demand is usually high for the metal, meaning that its price is substantially high.

Still, if people lack the money to buy platinum, the demand for it will drop. As this is the case, the price of platinum can be affected significantly by economic turmoil. As opposed to gold, which tends to show its strength even when the economy struggles, platinum prices can fall precipitously when these hard times occur. By contrast, overall economic strength usually is accompanied by higher demand for platinum, at which point its price can soar above the price of gold.

A little more than half of the platinum produced in the world is used by the automobile industry. Catalytic converters, which are contained in cars, allow cleaner automobile emissions, which have become increasingly desirable as environmental issues have come to the forefront in society. As a result, strength in the auto industry usually raises the price of platinum, and the opposite occurs if automobile production is slowed. In addition, platinum's use in jewelry often means its price is tied up with the fortunes of that industry.

It is also important to note that the majority of the world's platinum comes from just two areas of the world. Mines located in South Africa and Russia account for a large portion of the world's platinum production. As a result, any sort of upheaval in these parts of the world that affects production can have a significant impact on the supply of the metal and, thereby, the price of platinum as well.