The platinum ETF may be a smart play to diversify an investment portfolio for the environment ahead.
“While platinum’s narrative is linked to negative diesel sentiment in Europe and China, the shift away from diesel is not the only driver for platinum prices in 2018,” Maxwell Gold, director of investment strategy at ETF Securities, said in a note. “Platinum remains cheap relative to gold, palladium, and other real assets – and further market volatility may push investment demand higher.”
Looking at the supply side, South Africa, the biggest producer of the precious metal, is starting to strengthen due to investment and reform agendas from the new President. Gold pointed out that platinum prices have exhibited a strong correlation the South African rand currency – as the ZAR appreciates, the higher costs of production and lower U.S.-dollar-denominated platinum prices would put pressure on miners, causing slowdowns in production.
According to Metals Focus, South African platinum mine supply may drop 0.9% in 2018 and falling by 2.7% by 2020.
Strengthening Fundamentals in Platinum
On the demand side, platinum will continue to enjoy robust industrial demand. Additionally, platinum jewelry is starting to enjoy a jump in demand as well, especially among the Millennial generation – younger generations in traditional gold-centric economies like India saw 2017 platinum jewelry sales jump 25%, according to Platinum Guild International.
Consequently, ETF Securities and Gold project [latinum prices may average $1,040 per ounce this year driven by higher emerging market growth and rising global industrial production. The platinum spot price was $958.5 per ounce Wednesday.
ETF investors interested in diversfying a portfolio with platinum exposure may consider something like the physically backed ETFS Physical Platinum Shares (NYSEArca: PPLT).
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