Platinum and palladium exchange traded funds (ETFs) are reflecting the love investors have for metals that do much more than look pretty.
Platinum demand is being driven, literally, by its primary use as a catalyst in devices that remove automotive pollutants, says Carolyn Cui for the Wall Street Journal. Thanks to tightening emissions standards and a growing global auto population, demand for the metal has risen 8.6%.
Factor in the personnel, production and equipment woes of mining companies already struggling to keep up with demand, and you’ve got rising prices. South Africa’s electricity outages earlier this year also pushed the price of metals, including gold and platinum, to new highs. Platinum is 12% off its high.
Since ETFs that hold physical platinum were launched by London’s ETF Securities last year, the price of platinum has risen 52% and palladium is up 20%.
Fund companies looking to harness that growth have been launching a number of new products this year, including:
- iPath Dow Jones-AIG Platinum (PGM): Launched on June 24
- E-TRACS UBS Long Platinum (PTM): Launched on May 9
- E-TRACS UBS Short Platinum (PTD): Launched on May 9
- ELEMENTS MLCX Precious Metals (PMY): Launched on April 4; holds 32% platinum; 52% gold; 8% silver and 8% palladium
But unlike ETFs for platinum, the ETNs don’t hold the metal, which leaves the market unaffected. Instead, they buy or sell contracts in the futures market to replicate price movements.
Some have noted that demand for platinum has been tapering off, driven lower by the high prices. For years now, automakers have been replacing platinum with palladium, which isn’t as pricey.
Some automakers are looking to go even cheaper than that, as one mining company has developed a catalyst that uses silver for diesel-fueled engines.
Other ways to access precious metals include:
- iShares Silver Trust (SLV), up 20.2% year-to-date
- PowerShares DB Precious Metals (DBP), up 10.5% year-to-date
- SPDR Gold Shares (GLD), up 10.2% year-to-date
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.