Here Come Higher Platinum Prices

January 23rd at 1:18am by Tom Lydon

The ETFS Physical Platinum Shares (NYSEArca: PPLT) and the ETFS Physical Palladium Shares (NYSEArca: PALL) could be in for near-term upside thanks to a familiar catalyst: Labor strife in South Africa.

South Africa, Africa’s largest economy, is the world’s largest platinum producer and second-largest palladium producer. That could be good news for traders and investors bullish on those metals and ETFs like PPLT and PALL.

“Up to 80,000 workers at Impala Platinum, Anglo American Platinum and Lonmin mines will embark on an indefinite strike from early Thursday, after their demand to double the minimum monthly wage to $1,150 was rejected,” according to the Agence France Presse.

The mining giants started paring platinum production Wednesday night, though the news of the mine closures did not have much of an impact on palladium and platinum futures as both traded slightly lower in Asian trading.

Still, the news has the potential to boost the two precious metals, of which analysts were far more bullish on heading into 2014 than gold and silver. [Palladium Breakout Could be Near]

Last year, PALL eked out a small gain and although traded lower, it was significantly less bad than the comparable gold and silver ETFs.

How the strikes affect PALL could be of particular interest to investors. Not only is auto demand in the U.S. on the rise, but palladium supplies are projected to be in deficit relative to demand again this year. The impact of the strikes on palladium futures is especially noteworthy due to concerns that Russia, the world’s largest producer of the metal, has possibly exhausted its reserves. [Palladium ETF Could Soon Surge]

Although the iShares MSCI South Africa ETF (NYSEArca: EZA) would appear to be a viable derivative play on the labor strife there, sticking with PALL and PPLT could be the better idea, particularly if the strikes turn violent.

“In August 2012, some 34 striking miners at Lonmin were shot dead by police amid violence that killed around a dozen more,” according to AFP. EZA faltered in the wake of that bloodshed.

ETFS Physical Platinum Shares

 

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.