U.S. investors have long awaited a physically-backed palladium funds, and their wishes may finally be coming true.

Don Dion for The Street explains that ETF Securities is planning to launch the ETFS Palladium Trust (NYSEArca: PALL) will be the first U.S. listed fund that holds the physical metal. (Other ways to play palladium before the launch).

The timing for the launch may not be better. China and India are both working to cut down on greenhouse gas emissions. This could directly impact the market for platinum, which is used heavily in catalytic converters, which controls such emissions. More than half of all platinum is used in catalytic converters.

Prices for platinum are now topping $1,300, making it more expensive than gold, reports DaveCarpenter for Associated Press.

Some of the other uses of palladium and platinum include:

• Dentistry: Used to make dental crowns and bridges; used for the treatment of cancer in radioactive form.
• Oil Refining: Used in various stages of oil refining, certain converters are made with palladium.
• Electronics: Used for its chemical stability and electrical conductivity; a reliable alternative to gold in plating. (Can platinum be a substitute for silver or gold in a portfolio?)
• Jewelry: Platinum is a popular metal used in engagement rings and other fine jewelry.

For more stories about precious metals, visit our precious metals category.

Barclays Bank PLC has temporarily suspended any further sales from inventory and any more issuance of the ETN iPath Dow Jones AIG Platinum TRSub Index (NYSEArca: PGM), write Kristin Friel and Christine Hudack for Trading Markets.

The suspension of notes may cause deviations in the trading value – more commonly known as tracking error – of the ETN. By limiting the issuance and sales, an imbalance of supply and demand in the secondary market for the notes may occur, and the result would be notes trading at a premium or discount in relation to the baseline value. (How to play precious metals with ETFs and ETNs).

Commodity ETFs have been grappling with potential CFTC regulations for the last several months. (How times are changing for commodity ETFs).

ETNs  are unsecured obligations, not secured debt. The securities have no principal protection; thus, riskier than ordinary unsecured debt securities. (Seven differences between ETFs and ETNs).

For more information on platinum, visit our platinum category.

• iPath Dow Jones AIG Platinum TRSub Index (NYSEArca: PGM): up 49.7% year-to-date

Other platinum ETNs are unaffected, including E-TRACS UBS Short Platinum ETN (NYSEArca: PTD) and E-TRACS UBS Long Platinum (NYSEArca: PTM).

Max Chen contributed to this article.

There are many reasons to buy into a precious metals investment, and ETFs can give the desired  exposure to gold, silver and platinum.

Gold. Gold is the godfather of all the precious metals for various reasons, according to Aryeh Katz for Investopedia:

• Gold is a safe haven and is recognized by almost all governments as being a safe store of value
• Inflationary pressures can be hedged with gold (read more on fighting inflation with ETFs here)
• War and political upheaval have always sent people into gold-hoarding mode; an entire lifetime’s worth of savings can be made portable and stored until it’s needed

Moming Zhou for MarketWatch reports that Jim Rogers recently claimed gold will hit $2,000 per troy ounce within the decade. As long as the U.S. dollar continues to weaken, gold prices could continue to rise because gold priced in dollars will become cheaper for overseas buyers (Read 7 more things you should know about gold here).

• SPDR Gold Trust (NYSEArca: GLD)
• iShares COMEX Gold Trust (NYSEArca: IAU)
• PowerShares DB Gold (NYSEArca: DGL)
• ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)
• Market Vectors Gold Miners (NYSEArca: GDX)
• E-TRACS UBS Bloomberg CMCI Gold ETN (NYSEArca: UBG)

Silver. Silver – the “poor man’s gold” – is also a good way to hedge against inflation, and it benefits from its appeal as both an industrial and precious metal. This means that it can be treated as a safe haven investment, as well as an investment for investors looking to benefit from an uptick in industrial demand. A note of caution:  since silver’s market is smaller than gold’s, it can be more volatile. Silver’s main investment approach is determined by factors such as:

• Silver’s role in photography and film has kept demand high; however, the advent of digital cameras has dented the need for silver
• Middle class population growth in emerging markets is great, and this demand for industrial and electrical supplies puts much more pressure on the silver store
• Silver’s use in batteries, superconductor applications and microcircuit markets is a major source of demand
  

• ETFS Physical Silver Shares (NYSEArca:SIVR)
• iShares Silver Trust (NYSEArca: SLV)
  
• PowerShares DB Silver (NYSEArca: DBS)
• E-TRACS UBS Bloomberg CMCI Silver (NYSEArca: USV)
  

Platinum. Platinum tends to fetch a higher price than gold during routine periods of market and political stability simply because it’s much rarer. Other factors affecting platinums price include:

• The greatest demand for platinum comes from automotive catalysts, which are used to reduce emissions; after this, jewelry accounts for the majority of demand
• Auto sales and production numbers are also determinants of platinum’s price
• Platinum mines are heavily concentrated in two countries: South Africa and Russia; This places much more pressure on the platinum market.

Jeff Nielson for DNA reports that the direction of the precious metals markets are not easy to determine in the short term. The longer the time horizon (and the larger the data stream), the more predictable are the movements of companies, commodities, and overall markets.

Various ETFs that give exposure to precious metals:

• E-TRACS UBS Long Platinum ETN (NYSEArca: PTM)
• iPath Dow Jones AIG Platinum TRSub Index (NYSEArca: PGM)

In addition to specific exposure to metals ETFs, investors can also find broad metal ETFs that hold either the metals themselves, futures contracts or the stock of companies involved in the production of these metals:

• PowerShares Global Gold & Precious Metals (NYSEArca: PSAU)
• SPDR S&P Metals & Mining (NYSEArca: XME)
  
• Emerging Global Shares DJ Emerging Markets Metals & Mining Titans (NYSEArca: EMT)
• PowerShares DB Precious Metals (NYSEArca: DBP)
• iPath Dow Jones AIG Precious Metals TR Sub Index (NYSEArca: JJP)
  

For more stories about precious metals, visit our precious metals category.

For full disclosure, Tom Lydon’s clients own shares of GLD and SLV.

Hard-asset ETFs can be used to both diversify a portfolio as well as protection from both inflation and broader market turmoil, comments Don Dion for TheStreet.

Some hard asset ETFs don’t hold futures or physical commodities. Instead, these funds track indexes made up of the stock of commodity producers. Some broad equity-based, hard-asset ETFs include:

• SPDR S&P Metals & Mining (NYSEArca: XME), currently up 66.8% year-to-date, includes U.S. metals and mining companies. The fund has an expense ratio of 0.35%.
• Market Vectors RVE Hard Assets Prod ETF (NYSEArca: HAP), currently up 29.9% year-to-date, this fund seeks to reflect the Rogers-Van Eck Hard Assets Producers Index, which is often quoted as the definitive commodity equities benchmark. HAP also holds water and renewable energy components in its portfolio.

iPath offers both broad and specific exposure to hard assets with a line of exchange traded notes (ETNs) that track the futures contracts and Treasuries. Potential investors in these ETNs should be aware of regulatory actions that the Commodity Futures Trading Commission (CFTC) may impose.

• iPath DJ AIG Ind Metals TR Sub-Idx ETN (NYSEArca: JJM): up 45.6% year-to-date; includes a basket of commodities.
• iPath DJ AIG Tin TR Sub-Idx ETN (NYSEArca: JJT): up 42.3% year-to-date
• iPath DJ AIG Platinum TR Sub-Idx ETN (NYSEArca: PGM): up 32.5% year-to-date
• iPath DJ AIG Lead TR Sub-Idx ETN (NYSEArca: LD): up 114.7% year-to-date
• iPath DJ AIG Aluminum TR Sub-Idx ETN (NYSEArca: JJU): up 10.5% year-to-date

ETF Securities has successfully launched global physical-asset ETFs:

• ETFS Silver Trust (NYSEArca: SIVR): up 9.8% in the last month
• ETFS Gold Trust (NYSEArca: SGOL): down 1.3% in the last week

Larry Swedroe, principal and director at Research at BAM advisor Services and at Research for Buckingham Family of Financial Services, says that purchasing commodities is a way to protect against supply shocks and event risks that could negatively influence a portfolio of stocks and bonds, according to iStockAnalyst.

Swedroe also argues that position limits on commodity ETFs are “purely politically driven,” which could create conditions of more volatility. The ultimate outcome, he says, will result in the value of contracts being driven higher and people having to pay more for insurance.

For more information on commodities, visit our commodity category.

Max Chen contributed to this article.

Much of the recent spike in commodity prices has been driven by a weaker greenback. But David Bogoslaw for BusinessWeek asks whether now is the time to bet on commodities. He notes that it’s going to take some examination of economic signals, both good and bad, to answer the question:

• China has been a big driver of global commodities demand for the last decade. China is said to be scaling back on its consumption of commodities as they rein in their stimulus, which has sparked fears that this could depress prices.
• Renewed demand for cars, thanks to the very successful “Cash for Clunkers” program, as well as a recovery in housing, may help sustain demand for certain commodities domestically.
• The direction of the dollar is a key driver. If the dollar continues to weaken, as some feel it might, this could make commodities more affordable for overseas buyers.
• Mining strikes could deplete inventories. One mine that accounts for a third of South Africa’s platinum production may go on strike this week; a strike in Canada is being blamed for the spike in nickel costs.

Agriculture is still a popular segment of the commodity market. Even if China backs off on spending, the country’s citizens could still demand food as much as they were before, one analyst notes. Meanwhile, soybeans are poised to hit a record $20 a bushel as stockpiles in the United States dwindle, report Claire Leow and Susan Li for Bloomberg.

The fracas over futures-based commodity ETFs continues as iShares S&P GSCI Commodity Index Trust (GSG) said it would stop issuing new shares once it hit 55.9 million. Currently, there are 52.5 million shares, reports Ian Salisbury for Dow Jones Newswires.

GSG joins a growing line of funds that have said they’ll stop issuing new shares until the CFTC officially rules on what kinds of caps it would impose on these funds.

Whether it’s time to get into commodities or not, watch the trend lines for signals. Our strategy utilizes the 200-day moving average when looking for opportunities and potential long-term uptrends. Read more on our strategy here.

The fact that silver prices are moving in an upward direction are positive signs that the markets may be, too. This also indicates that consumption may be mending and ready to rebound. Another benefit of going to silver is that it’s cheaper than gold, but no less useful as an inflation hedge.

Silver can be targeted with the iShares Silver Trust (SLV), which holds gold bullion and is up 37.1% year-to-date.

Meanwhile, the auto industry has left depressed marks in many areas of the markets, and platinum is one metal that has fallen off in demand along the way. Platinum is mainly used in autocatalysts to clean exhaust fumes from vehicle emissions, which accounts for 60% of the metal’s total demand, reports Frank Tang for Reuters.

Recent proposals for a U.S.-listed platinum ETF would give the metal a lift and fill up some of the tamped-down demand. Recent interest had led to ETF Securities filing with the Securities and Exchange Commission (SEC) for the first platinum and palladium trusts available in the United States. ETFs back each security issued with physical stocks of a given commodity. They are listed on stock exchanges and offer investors exposure in the underlying commodity without taking delivery.

The potential upside for platinum is great, with the economic recovery spurring demand for the metal once the auto industry resumes normal operations. Platinum has been trading down about half of its $2,290 per ounce record set in March 2008.

One way to access platinum in the United States right now is through an exchange traded note (ETN):

• E-TRACS UBS Long Platinum ETN (PTM): up 26.9% year-to-date

For full disclosure, some of Tom Lydon’s clients own shares of SLV.

The plan does help tackle the feud between automakers and statehouses over emission standards. Automakers get one single standard and the states get their emission standards honored. New vehicles would be 30% cleaner and more fuel-efficient by the end of the program.

Which ETFs have the potential to benefit from this plan, and which ETFs might be on the losing side? (But remember: these aren’t predictions, and we’re still watching the trend lines to see what actually transpires once this plan is fully in effect in 2016).

On the Potentially Negative Side…

If we reduce our dependence on oil and don’t need as much of it to keep our cars operating, that may naturally create less demand and possibly keep prices down.

• United States Oil (USO): down 1.2% year-to-date

The same goes for gas – more fuel efficiency, fewer fill-ups, less gas needed. Will it equate to lower prices?

• United States Gasoline (UGA): up 52.2% year-to-date

On the Potentially Positive Side…

Overall, the environment should be a winner with this plan. Cleaner air, fewer emissions and some kind of help toward solving the problem of global warming. For that reason, environmentally focused ETFs could reap the rewards, as well, as the movement toward cleaner energy and conservation gathers interest.

• PowerShares Wilderhill Clean Energy (PBW): up 5.6% year-to-date

Consumers could win, too. While these cars could cost up to $1,300 more, greater fuel efficiency could ultimately translate into more money in their pockets over time. That could mean more disposable income and greater spending on discretionary items.

• Vanguard Consumer Discretionary (VCR): up 11.2% year-to-date

Platinum could benefit, too. After all, it’s a primary ingredient in catalytic converters, which are devices designed to reduce the toxicity of emissions. Of course, while the catalytic converter will still be a component of the new cars, there’s no way to clean carbon dioxide out of a car’s exhaust. The only way to reduce that is to reduce the amount of fuel burned, says Bay News 9.

• E-TRACS UBS Long Platinum ETN (PTM): up 17.8% year-to-date

The U.S. auto industry could benefit from this new push, too, if they create the right kind of vehicles in a cost-effective way.

Why should investors consider single country funds? These country funds allow for some commodity exposure and provide a little more diversity over picking a single commodity fund. Potential investors should note that some funds are heavily weighted in commodities and their economies could be too dependent on them – Russia energy dependence is a prime example. It is worth the extra few minutes to peruse the finer details of specific country funds.

While there are many different commodity-rich countries to choose from, these are just some examples of countries that are rich in commodities.

South Africa. This country’s miners are the largest producers of platinum, gold and chromium. South Africa is an emerging market with a large middle-class. They have natural resources; developed financial, legal, communications, energy and transport sectors. But there is a high level of joblessness and poor infrastructure does constrain growth. The government tries to control inflation, have budget surpluses and create jobs through government-owned enterprises.

• iShares MSCI South Africa Index (EZA): up 3.9% year-to-date; materials is 29.7%

Chile. Its economy favors foreign trade and it has healthy financial institutions. Commodities make up around 75% of total exports and exports are 40% of GDP. Copper is a main staple of the country, which accounts for 33% of government revenue. The government adheres to a counter-cyclical fiscal policy by holding wealth from trade surpluses during economic growth, and goes into deficit spending when there growth is low or copper prices are down.

• iShares MSCI Chile Investable Mkt Idx (ECH): up 18.9% year-to-date; materials is 19.5%

Russia. Since 2000, Russia has improved its financial sector and they had high trade surpluses. But the positive trends started to reverse itself in the second half of 2008. Their banks are now faced with liquidity problems. The economy is heavily reliant on energy and raw materials. Investors are wary of the country’s corruption, institutions and exchange rates.

• Market Vectors Russia ETF (RSX): up 30.1% year-to-date; gas & oil is 40.2%

Australia. This is the world’s largest net exporter of coal. Australia has a high per capita GDP. The government focuses on reforms, low inflation, housing market and ties with trading partners like China. In recent years, their exporters of raw materials and agricultural products enjoyed the high prices of commodities. The government may also provide a fiscal stimulus to deter slow growth in 2009.

• iShares MSCI Australia Index (EWA): down 0.1% year-to-date; materials is 25.6%
  

Max Chen contributed to this article.

London-based securities group ETF Securities filed for the first bullion-backed platinum and palladium ETFs to the United States. The last time the idea of such ETFs was floated back in 2007, there was plenty of resistance. This time, the move has been met with silence.

Hard Assets Investor on iStockAnalyst says that The Big Three can be thanked for the quiet this time around: The auto industry’s collapse has changed everything, making it possible for ETF Securities to bring its platinum and palladium funds – already very successful in Europe – to the States.

The biggest question now is whether there will be shortages of this bullion, as the economic pullback has investors crazy for physical investments. Keep in mind that platinum and palladium are primarily industrial metals, used in everything from computer hard drives to fertilizers to fiber optic cabling. Platinum also plays a key role in the catalytic converter, where the harmful emissions from cars are cleaned up.

Investors eager to see the launch of these funds will for now have to content themselves with exchange traded notes (ETNs) until the first ETF is introduced instead. Bear in mind that there’s also no guarantee that the Securities and Exchange Commission (SEC) will give the go-ahead to these funds.

The ETNs don’t hold any physical bullion.

• E-TRACS UBS Bloomberg Long Platinum ETN (PTM): up 21.6% year-to-date

• iPath Dow Jones AIG Platinum TR Sub-Index ETN (PGM): up 22.9% year-to-date

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• How to Use Bond ETFs
• Could a New Platinum ETF Send Prices Haywire?