Although 2013 was a pretty rough year for commodities, the past
few weeks have been solid for the space. A weak jobs report pushed
fears of more tapering to the backburner, while sluggish stock
prices (and a flat dollar) have rekindled investors' interest in
many natural resources.
While most commodities have benefited from this trend, investors in
the platinum market have to be especially pleased. After all, this
commodity has risen in the past few weeks thanks to the
aforementioned trends, as well as some other platinum-specific
factors as well (see
all the Precious Metals ETFs here
Thanks to this, platinum could be well-positioned for solid returns
this year, especially if investors see a broadly better environment
for commodities. Already the product has seen its price rise from
about $1,340/oz. a month ago, to its current level approaching the
$1,470 mark, putting the commodity within striking distance of its
three month high.
Beyond some of the broad commodity factors, the labor unrest in
South Africa also played a role in platinum's rise as of late.
A union representing the country's top three
has called for a nationwide strike with 90,000 expected to
participate. This has led to a drop in production, and continued
labor issues in the world's number one supplier of platinum could
help to keep prices firm.
And just as supplies begin to dip, demand is looking to rise,
largely thanks to surging automobile sales both here and in Europe.
Autos are vital for platinum prices because catalytic converters
are big users of platinum-group metals, so when car demand surges,
platinum demand tends to go up as well (Read
These 3 ETFs Could Soar on Strong Car Sales
American car demand has been especially robust, with unit sales
staying above an annual rate of 15 million since April's data, but
the real story has been in Europe. Analysts and industry executives
now are looking for growth in
European auto sales in 2014
-after six years of decline-suggesting that the platinum-metal
group could be in a very solid demand environment this year.
How to Play
For investors seeking to get in on the platinum market, there are a
few ETFs that have direct exposure. Easily the most popular is the
ETF Securities Physical Platinum Shares (
which has over $750 million in assets under management.
The fund invests in bars of platinum and holds them in a secure
European facility, charging investors 60 basis points a year in
fees for this service. The ETF is pretty much flat over the past
three months, though it has added nearly 9% in the past one month
time frame and could be poised for more gains in the months ahead
7 ETFs to Buy in 2014
There are also a few ETNs in the platinum space including the
iPath DJ UBS Platinum TR Sub Index ETN (
UBS E-TRACS Long Platinum TR ETN (
. Both of these suffer from lower assets and low volume levels,
though they have seen similarly good performances over the past one
month time frame.
Investors also have access to the
First Trust ISE Global Platinum Index Fund (
for platinum exposure. This fund focuses on companies that mine or
process the metal, and it too has added nearly 10% in the past
Volume and assets are a little low here, while expenses come in at
70 basis points a year, but it is the only pure play on platinum
mining companies. The focus for this fund is on international firms
in the small cap space, so volatility could be high though it is a
solid choice for equity access to this platinum investing story.
ETF Securities Physical Palladium Shares (
Palladium is also used in many catalytic converters, and it can
suffer from some of the same supply problems as platinum. For this
reason, PALL may also be an interesting choice for investors (read
Time to Buy This Precious Metal ETF?
This product also holds bars of its metal in a secure European
facility, and it charges investors 60 basis points a year in fees
too. It is a bit less popular than PPLT-not too surprising given
that palladium also appears to be less popular than platinum in the
metals market-but it has added over 6.8% in the past month and
could be another way to play the supply imbalance in the broader
platinum group metals market.
Thanks to some contrarian buying, and hopes for a taper hold,
commodity investing has been reasonably profitable as of late.
Investors are finally starting to embrace some products again, and
fundamentals are setting up nicely in a few corners of this asset
This is especially true in the case of platinum, as the metal has
taken off as of late, and could be well-positioned for more gains
in the months ahead. Both labor issues in South Africa and rising
car demand seem likely to boost platinum prices in the months
ahead, suggesting that a look to platinum ETFs could be a solid
idea, particularly if the commodity investing environment is a bit
more favorable this year.
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Author is long PPLT
ETFS-PALLADIUM (PALL): ETF Research Reports
IPATH-DJ-A PLAT (PGM): ETF Research Reports
FT-ISE GLBL PLT (PLTM): ETF Research Reports
ETFS-PLATINUM (PPLT): ETF Research Reports
E-TRC UBS LG PL (PTM): ETF Research Reports
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