It's time to keep an eye on platinum

Key points:

• Late December into mid-February has historically been the most favorable time for platinum
• The performance during this period especially stands out compared to performance over the rest of the calendar year
• A similar play can be made using an ETF instead of trading platinum futures

The data used for testing

We used a continuous platinum futures contract from Bloomberg to test platinum performance for this piece. This contract dates back to 1987. This contract may include market holidays when the New York Mercantile Exchange (NYMEX) is closed if electronic trading occurs on that day. In testing, we use this contract as a proxy for platinum bullion.

We use the abrdn Physical Platinum Shares ETF (PPLT) for ETF testing, which only trades when the NYSE is open.

The favorable period for platinum futures

Platinum has been a poor performer for most of 2023. However, if history proves a reasonable guide, it may see some improvement in the weeks and months ahead.

The chart below highlights the most favorable time of the year for platinum futures. It extends from the close on Trading Day of Year (TDY) #254 through the close on TDY #36 of the new year. For 2023-24, this period extends for futures trading from the close of 2023-12-22 through the close of 2024-02-20.

For platinum futures, each point movement in the price of platinum is worth $50. The chart below displays the cumulative hypothetical $ gain or loss achieved by holding platinum futures from the close on TDY #254 through the close on TDY #36 each year starting in December 1987.

The table below summarizes platinum futures performance during the seasonally favorable period. During these windows, the contract gained 86% of the time, with average gains far outpacing average losses. There were 18 years with gains of $2,000 or more versus no years with losses larger than $2,000.

Using an ETF instead of trading futures

The one glaring problem with the information above is that most individuals will never trade platinum futures. So, let's consider an alternative.

The abrdn Physical Platinum Shares ETF (ticker PPLT) is an ETF intended to track the price of platinum bullion. Traders can buy and sell shares of PPLT just as they would shares of stock. While this approach lacks the leverage of futures trading, it makes a platinum investment more accessible to many individual traders.

Because this ETF does not trade electronically on market holidays like the futures contract we follow, it has fewer trading days in a typical year than the futures contract. As a result, the seasonally favorable period for PPLT is slightly different and includes the following:

• The last five trading days of the current year
• The first 33 trading days of the next year

This year, the favorable period for PPLT extends from the close on 2023-12-21 through the close on 2023-02-16. The chart below shows the growth of $1 invested in PPLT ONLY during our seasonally favorable period starting in December 2010.

The table below displays year-by-year results for PPLT only during the seasonally favorable period. 

After an initial runup, the sharp downside reversal and -6.2% net loss during last year's seasonally favorable period reminds traders that no seasonal trend is guaranteed to work "the next time" and that traders must seriously consider allocation size and potential stop-loss provisions.

To fully appreciate platinum's performance during the seasonally favorable period, the chart below displays the cumulative growth of $1 in PPLT during all other trading days. It excludes the last five trading days of the year and the first thirty-three trading days of the following year.

Over the past 13 years, PPLT has returned +174% during seasonally favorable periods and -81% during all other trading days. As always, this guarantees nothing but is a good reminder of the importance of giving the bullish case the benefit of the doubt during the upcoming window - and to be careful to avoid trying to "swim upstream" the rest of the year.

What the research tells us…

Platinum tends to rally early and very late in the year; however, results vary widely from year to year. While results have been consistently favorable in the past, there is no guarantee that this degree of favorability will continue. Platinum futures offer the potential for significant gains but also large losses for the unprepared and/or under-capitalized trader. The PPLT ETF offers traders an unleveraged way to play the long side of platinum.