Fresh U.S. sanctions against Russia are having a positive impact in at least one part of the financial markets. Platinum prices are rising because Russia is the second-largest producer of the metal behind South Africa.
The ETFS Physical Platinum Shares (NYSEArca: PPLT), the largest exchange traded fund listed in the U.S. backed by physical holdings of platinum, is up 3.2% over the past week and 6% over the past month, moves that account for significant chunks of PPLT’s 6.9% year-to-date gain.
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.
“Platinum posted its best weekly advance since January, climbing for six-straight days as the U.S. imposed further sanctions on the world’s second-biggest producer,” reports Eddie Van Der Walt for Bloomberg.
The latest U.S. economic sanctions against Russia are playing a part in the recent platinum surge.
“The metal is outperforming the wider Bloomberg Commodities Index as concern about the political tension between Russia and America grows. It’s a respite for platinum amid longer-term declines, with consumers turning away from the diesel engines that use the metal to filter fumes,” according to Bloomberg.
Another positive and important catalyst for platinum is that more of the metal is expected to be consumed this year compared to how much producers are able to mine, meaning demand will outpace supply.
Related: Platinum ETF Maintains Rebound in Precious Metals
Over the long-term, platinum and palladium could face slowing demand as electric vehicles become more affordable and accessible to larger numbers of buyers.
“Take-up of electric cars may prove more devastating for platinum group metals demand than digital photography was for silver, Bodo Albrecht, chair of the International Precious Metals Institute, told the Reuters Global Gold Forum,” reported Reuters last month.
PPLT is down 17.1% over the past year, more than double the loss of the comparable gold ETFs over the same period.
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