With gold and silver on the move higher again to start 2017, it is not surprising that the corresponding exchange traded products are grabbing renewed attention.
However, investors would do well to remember platinum and the ETFS Physical Platinum Shares (NYSEArca: PPLT).
PPLT, the largest exchange traded fund listed in the U.S. backed by physical holdings of platinum, is higher by 12.5% year-to-date.
Although platinum is not as heavily traded as gold or silver, it is the third-most traded precious metal in the world and it is more scarce than its more popular rivals. 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.
“The best way to analyze whether gold sits at washed-out historical levels is to compare it to other major assets, such as bonds, stocks, and housing…digging even deeper into the commodity pile, we find that gold looks expensive versus other precious metals,” according to a Wells Fargo note on platinum posted by Crystal Kim of Barron’s.
Despite the Federal Reserve hiking interest for the first time in almost a decade with more to come in 2017, gold could continue to find support in the ongoing low-rate environment, Gold said. Silver remains attractively priced relative to gold prices, with the gold-to-silver ratio hovering near its historic average. Platinum is currently showing a discount to gold at a 40-year high. Meanwhile, palladium is being supported by historic high automobile sales and industrial demand – palladium is used in autocatalysts in the car industry.
“Platinum also appears to be a much better value than gold. We see that gold today trades at roughly a $200, or 20 percent, premium to platinum. This is a high gold premium; in the past, gold has averaged a 20 percent discount to platinum. Platinum today is a much better value buy than gold, should investors be hunting for precious metal plays,” according to the Wells Fargo note seen in Barron’s.
Looking ahead, the ongoing negative interest rate environment, with European and Japanese central banks cutting benchmark rates deeper into the red to promote growth, could push investors toward precious metals as a more stable store of wealth.
Moreover, unlike gold, palladium, platinum and silver see much higher industrial demand. The precious metal enjoys heavy industrial demand that benefits from an expanding global economy.
For more news on Precious Metals ETFs, visit our Precious Metals category.