Among precious metals, gold usually gets the most attention, but if a global economic recovery takes hold, investors may want to consider more economically sensitive fare, including palladium and platinum.
Both are accessible in the Sprott Physical Platinum and Palladium Trust (NYSEArca: SPPP).
SPPP provides “a secure, convenient and exchange-traded investment alternative for investors who want to hold physical platinum and palladium. The Trust offers a number of compelling advantages over traditional exchange-traded platinum and palladium funds,” according to the issuer.
Making Platinum and Palladium Plays in 2021
Platinum and palladium are incorporated by automakers in catalytic converter manufacturing to clean greenhouse exhaust fumes. Axi chief global market strategist Stephen Innes argues that with consumers looking at more single-family vehicles over public transport, platinum group metals will benefit from the recovery in global automobile sales, tightening emission standards, and strong Chinese imports, Reuters reports.
Economists and market analysts argue that a Biden administration will contribute to tighter environmental regulations and a focus on green energy technology, which may mean tighter regulation on car emissions and increase demand for palladium and platinum in catalytic converters.
Car catalyst demand jumped over the past couple of years due to stricter emissions regulations across Europe and China’s plans to toughen standards in a bid to reduce smog. Catalytic converters help diminish toxic emissions and produce carbon dioxide, water, and nitrogen.
The return to lower interest rates around the world has also continued to support demand for physical assets, which tend to exhibit an inverse relationship to interest rates since investors are less apt to hold raw materials when bonds offer higher yields in a rising rate environment.
Though it’s not an exchange traded fund, SPPP offers tax benefits too.
SPPP “offers a potential tax advantage for certain non-corporate U.S. investors. Gains realized on the sale of the Trust’s units can be taxed at a capital gains rate of 15%/20% versus the 28% collectibles rate applied to most precious metals ETFs, coins and bars,” notes Sprott.
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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.
