ETF of the Week: Aberdeen Standard Physical Platinum Shares (PPLT)

ETF Trends CEO Tom Lydon discussed the Aberdeen Standard Physical Platinum Shares ETF (PPLT) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.

PPLT seeks to reflect the performance of the price of physical platinum, less the Trust’s expenses.

Key features include:

  • Physically-Backed: Cost-effective and convenient access to physical platinum.
  • Transparency: The metal is held in allocated bars, and a bar list is posted daily
  • Pricing: All metal is priced off the LPPM’s specifications for Good Delivery, which is an internationally recognized and transparent benchmark for pricing physical platinum.
  • Vault Location: Metal is held in London, United Kingdom at a secured vault of J.P. Morgan Chase Bank, N.A.
  • Vault Inspection: Inspectorate International, a leading physical commodity auditor, inspects the vault twice per year (including once at random).

Getting into Lydon’s thoughts on why to watch PPLT, Jaffe points out how platinum is quite different from gold, as they don’t always move together, as some may expect. Lydon explains how alternative strategies do come into play here.

While Gold has had a great run, recently reaching six-year highs, the equity markets may be getting a bit old. There’s also been more appetite for fixed-income ETFs than has been seen in a while. Still, with all of that in mind, advisors and individual investors are looking for opportunities outside the traditional equity and fixed-income areas.

The Power of Platinum

“If you drill down into precious metals,” Lydon explains, “There’s platinum, there’s palladium, there’s silver, there’s copper; all areas that you could buy the ETFs in a variety of forms. Platinum, specifically (and most people know it from the jewelry area, which is obviously a big area of demand) is primarily used in catalytic converters, diesel-powered automobiles.”

He adds how while there are not many diesel autos or trucks, but they are out there, and there’s a strong sign that, especially in foreign countries, there may be even more coming. The Chinese state council just recently noted the specific restrictions they place on auto sales has them stimulating automobile purchases internally. The goal is to grow auto sales, which will lead to a growing demand for platinum.

As Lydon clarifies, it comes down to supply and demand. And most importantly, in trends, there can be a huge pick-up.

“For example,” Lydon notes, “Last month in August, although the equity markets were somewhat flat, gold was up almost 6%, but platinum was up 12%. So we’ve seen a bit of a momentum shift.”

So, advisors, investors, and those looking for ways to diversify can look at PPLT as something to keep an eye on.

Possibly Undervalued?

Jaffe notes how, based on various analyses, palladium is a bit undervalued. He then adds how ETFs such as this one could serve as a way to take some chances based on technical data.

Lydon responds by stating how it certainly is vital to know what you’re getting into when it comes to allocating funds. There could be more risk when getting more specific. In reference to precious metals, in particular, yes, they have lately had a pretty good run. The current value is quite strong, even if platinum is trading at a lower price than gold and palladium.

“Does that mean that it’s undervalued? It all depends on supply and demand. So, there’s a whole other world in the gold market, on a supply and demand basis versus platinum, which is mostly an industrial metal, even though most people would feel like it would be more jewelry oriented.”

Lydon continues to explain how gold’s appeal comes from store value for jewelry and emerging markets. Platinum needs to be looked at differently. Diversification is essential, as well as keeping an eye on trends.

For what it’s worth, platinum is above its 200-day average. However, at the same time, it’s not just above that average. It’s actually about 15% above it, so a tighter stop-loss may be necessary, or trade on a 100-day instead.

“It’s an opportunity,” Lydon says. “It’s something that’s sticking out there a little bit, as you look at overall trends and momentum. But understand that when you look under the hood, you’re buying a precious metal. It can go down as quickly as it can go up.”

Related: ETF of the Week: US Global GO Gold and Precious (GOAU) 

As far as where PPLT should come from in a person’s portfolio, Lydon explains how at least 5% of any portfolio should always come from gold. With ETFs, it can be gold, gold miners, and other precious metals.

With that in mind, it all depends on how much to spend on it. One ETF could represent a variety of metals. However, trends with metals tend to last for a while.

For more podcast episodes featuring Tom Lydon, visit our podcasts category.