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Platinum Falls Due to Concerns about Car Pollution Emmissions

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Touching the six-year low

Platinum futures on COMEX, a commodity division of NYMEX, fell to a six and a half year low on September 22, 2015. It touched the lowest mark of $926 per ounce on September 23 and settled at $932. Platinum has seen an overall fall of ~21% on a YTD (year-to-date) basis. The down day total for platinum is four out of ten prior trading days. The trading volume for platinum also doubled compared the 100-day moving average.

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The recent Volkswagen scandal regarding the pollution emissions from diesel cars could also be a factor that impacts platinum prices. Volkswagen confirmed that 11 million vehicles globally were changed by software that faked pollution control. The average diesel car contains 4–6 grams of platinum. The demand for platinum depends on the diesel catalysts that are used to clean up exhaust emissions. 

The above chart explains the demand determinants for platinum.

Falling Chinese demand

Another reason behind the falling platinum prices could be that China’s losing its industrial appetite. China’s demand for energy, metals, and other raw materials saw a steep fall in the last few months. China’s lower demand led to a fall in the S&P GSCI (Goldman Sachs Commodity Index) of about 38% on a YTD (year-to-date) basis. A downfall in the Chinese demand led to an overall commodities sell-off. Other precious metals like gold, silver, and palladium have fallen ~2.80%, 3.20%, and 17.80%, respectively.

Tracking miners and leveraged ETFs

Investors withdrew funds from exchange-traded products backed by bullion. The total holdings fell. Leveraged ETFs like the Direxion Daily Gold Miners 1 (NUGT) and the Direxion Daily Jr. Gold Bear 3X (JDST) have lost ~71% and 46%, respectively, on a YTD basis. Mining companies that have seen the biggest fall on a five-day trailing basis as of September 24 are Alamos Gold (AGI), Coeur Mining (CDE), Barrick Gold (ABX), and Gold Fields (GFI). Together, these companies account for 12% of the price fluctuations in the VanEck Vectors Gold Miners ETF (GDX).

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