The Outlook for Palladium, Platinum ETFs

May 8th at 1:42pm by John Spence

Most investors focus on silver and gold exchange traded funds but within the precious metals complex there are also opportunities to diversify with ETFs tracking platinum and palladium.

Among platinum exchange traded products, investors can choose from ETFS Physical Platinum Shares (NYSEArca: PPLT), iPath Dow Jones-UBS Platinum ETN (NYSEArca: PGM) and UBS E-TRACS Platinum ETN (NYSEArca: PTM).

ETFS Physical Palladium Shares (NYSEArca: PALL) is the sole product for platinum.

The platinum ETF is actually outperforming gold and silver so far this year, while palladium is lagging.

“A strong lift in Chinese jewelry production and rising autocatalyst demand growth were behind the multi-year high in platinum demand in 2011. Exposure to the European diesel market and further substitution of platinum for palladium will likely be a restraint on further growth in this area in 2012,” ETF Securities analysts Martin Arnold and Nicholas Brooks said in a note Tuesday.

The firm manages several metals ETFs.

“Mine supply has been under pressure in 2012, with major platinum miners reporting declines in March quarter production, mainly due to the African labor disputes,” they wrote. [Why Platinum ETFs are Rallying]

In the palladium market, the analysts said fabrication demand is at an 11-year high, but is overshadowed by recycling and Russian supply. [Industrial Demand Brings Out Palladium ETF Luster]

“Palladium is less exposed to the sluggish European market and is more linked to buoyant emerging market and U.S. auto markets,” ETF Securities noted. “However, autocatalyst recycling hit a record high in 2011, while Russia again defied expectations of an exhaustion in its state stockpiles to swing the market from deficit to surplus in 2011. GFMS expects a deficit in 2012. The risk factor, apart from another surprise from Russian state reserves, is a further decline in investor appetite akin to 2011.”

Precious metal ETFs traded sharply lower Tuesday on fresh worries over Europe’s debt crisis. [Gold, Silver ETFs Dive in Risk-Off Trade]

ETFS Physical Platinum Shares


The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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