ETF Trends
ETF Trends

Physically-backed gold exchange traded funds, though still mired in a lengthy bear market, are doing their best to snap out of those doldrums and are up more than 5% to start 2016 as the ongoing market volatility pushed investors to safe-haven precious metals.

Up just a quarter of a percent to start the year, the ETFS Physical Platinum Shares (NYSEArca: PPLT) is clearly lagging its gold counterparts after PPLT touched an all-time low earlier this month. The precious metals group may have been gaining strength on increased speculation that the Federal Reserve may push off on rate hikes until later this year due to the increased volatility and economic uncertainty.

High levels of production are helping keep a lid on platinum prices relative to gold.

“Despite this, production in South Africa—the world’s top producer of platinum—hasn’t slowed significantly. Strong growth in the recycling of catalytic converters is adding low-cost supply, and an emissions scandal involving German auto maker Volkswagen’s diesel cars has sparked worries that consumers might avoid those more platinum-intensive engine models,” reports Alexandra Wexler for Barron’s.

According to the World Platinum Investment Council, South Africa, the largest producer of platinum and home to about 80% of the world’s proven platinum reserves, has experienced a precipitous fall in platinum investments from an annual $3 billion in 2008 to $1 billion in 2015, reports Emiko Terazono for the Financial Times.

Industry observers also believe that platinum companies have overextended operations during the commodities boom in prior years and have suffered from an oversupplied market as a result.

“A plunging South African currency is prodding miners to heap the metal into the global market. The rand has been plumbing successive all-time lows versus the U.S. dollar since late last year, and now trades at just under 16 to the greenback. Because miners’ expenses are largely paid in the local currency and their sales made in U.S. dollars, a weaker rand means better returns for platinum sold abroad,” according to Barron’s.

ETFS Physical Platinum Shares

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.