Platinum prices have jumped to $1,650 per troy ounce, the highest level in over a month. This increase is tied to China’s introduction of physically settled futures and options aimed at improving market transparency and participation across industries like jewelry and manufacturing. These contracts are traded on the Guangzhou Futures Exchange and are expected to create more demand for Platinum and Palladium. The exchange provides daily updates on warehouse stocks to enhance transparency, and the contracts are priced in RMB, helping buyers protect against price swings. The World Platinum Investment Council believes these futures contracts will attract end users in industrial and automotive sectors due to the option for physical delivery of Platinum and Palladium. The jewelry industry and other market players could also benefit from these futures and options for hedging. The recent price rise in platinum to $1,650 per ounce signals important trends for derivative traders. This development comes from new futures in China and rising expectations for interest rate cuts, leading to increased volatility and a positive outlook in the platinum market. The newly launched physically settled platinum and palladium contracts on the Guangzhou Futures Exchange (GFE) are a significant event. Initial trading has been strong, with reports of over 50,000 contracts traded in the first week, indicating high local interest. This adds a new source of physical demand that wasn’t a major consideration in daily price assessments before. The launch also brings greater market transparency through daily warehouse stock reports. Data shows that since trading began, there has been a net drawdown of 12,000 ounces from GFE-registered warehouses, suggesting that industrial users are actively taking delivery. Traders should keep a close eye on these daily updates as they reflect physical demand in China. The broader economic situation is also favorable, with the Federal Reserve’s meeting minutes from early November 2025 suggesting a more lenient approach. Markets indicate a 70% chance of a rate cut in the first quarter of 2026, which could weaken the US dollar and lift commodity prices. This environment supports long positions in platinum. We saw a similar shift when Shanghai launched its physically-backed gold contracts over ten years ago, which helped position the region as a key price-setter. The GFE platinum contracts could follow suit, potentially shifting pricing power eastward and suggesting that the current price strength is likely not just a short-term trend. With options now available for these metals on the GFE, we anticipate increased implied volatility in the coming weeks. This provides opportunities for derivative traders to use strategies such as long straddles to benefit from anticipated price fluctuations, regardless of the direction. The rising uncertainty makes options an appealing choice. This isn’t merely speculative; recent data shows that Chinese industrial output rose by 4.9% year-over-year in October 2025. This underscores a real need among end-users in the automotive and industrial sectors to hedge their exposure and secure physical supply. We should view this underlying industrial demand as a robust price floor for the foreseeable future.

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