Size of the Platinum Market

How big is the platinum market? It should be easy to answer this question, right? After all, the platinum market is a market for platinum. And we know that about 2.2 million ounces of platinum are in existence above ground (as of 2017). At today’s dollar price (a little above $860 per ounce, as of November 11, 2018), that comes to about $1.9 billion. Not bad, but it’s significantly smaller than in the case of gold (about $7.3 trillion) or even silver (about $3.5 trillion). They differ by a few orders of magnitude.

However, the annual supply in 2017 was about 8 million ounces (while demand amounted to 7.8 million ounces), so the value of the annual production (or consumption) of platinum is actually larger and amounts to $6.9 billion ($6.7 billion). It clearly shows that the stock-to-flow ratio is lower than in the case of gold or silver, implying that platinum is mainly an industrial metal.

Hence, only a tiny percentage of platinum is used as an investment. In 2017, it was only 3.4 percent of the total demand, or 265,000 ounces. So, the platinum which is a part of the financial market is worth only about $228 millions. We clearly see now that the platinum market is much smaller than the gold or silver market.

But we can also interpret and measure the size of the platinum market in terms of its liquidity. According to the London Metal Exchange, about 7,000 ounces of platinum worth $6 million were traded daily on average in October 2018 in the London market. If we add futures and silver ETFs, the trading volume would be even higher, but still rather limited compared to gold or even silver.

To sum up, the platinum market is small and rather does not constitute an important financial market in the modern economy. Given its size and liquidity, platinum is clearly not a monetary asset, in contrast to gold or even silver, but an industrial metal. Limited holdings of platinum imply that its price is much more sensitive to the balance of the annual demand and supply.