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Precious Metals ETFs: Platinum Could Outshine Gold


After investors dumped precious metals and related exchange traded funds in April, platinum prices have been outpacing the rebound in gold, and some believe the premium will widen even further.

On July 15, platinum prices were at a 11% premium to gold bullion, the most in almost two years, reports Nicholas Larkin for Bloomberg. Currently, platinum sits at around a 8.5% premium to gold.

Precious metals analysts tracked by Bloomberg contend that the premium will expand to 19% in the fourth quarter. [Platinum Mining ETF Rebounds With Gold Rivals]

The recovering global economy has helped bolster demand for automobiles, along with demand for platinum used in autocatalysts. About 60% of platinum demand is used in industrial applications, with car companies making the biggest consumer at 40%, compared to 10% for gold. Additionally, on the supply side, reduced output out of South Africa has curbed the flow of platinum. [Platinum Supply Deficit Seen Easing ETF Losses]

“On the platinum demand side, the feeling is that the worst is over and you’ve still got those supply-side issues,” Tom Kendall, the analyst at Credit Suisse Group AG, said in the article. “The worst period of crises for the global economy has passed and risks of another financial meltdown are subsiding. Something that is more of an industrial metal than an alternative currency like gold should outperform.”

“Demand for platinum is very likely to move higher while supply is quite constrained,” said Melek, the head of commodity strategy at TD Securities in Toronto, said in the article. “We’ll see deficits for the next few years and have strong investor interest. Gold tends to be a hedge for when things are really bad and when things stabilize you no longer may want to pay to hold that zero-yielding asset.”

Gold futures were trading around $1,327 per ounce Tuesday while platinum futures were at $1,438 per ounce.

The  Market Vectors Gold Miners ETF (GDX) is still down 2.4% since the steep plunge in mid-April, whereas the ETFS Physical Platinum Shares (PPLT) has gained 2.1%. Year-to-date, GLD has lost 20.7%, whereas PPLT has declined 6.9%.

Investors have been dumping gold ETFs. GLD has lost $19.9 billion in assets year-to-date, according to IndexUniverse. Meanwhile, investors still hold a near-record amount of assets in platinum ETFs as PPLT added $161.9 million in net inflows this year. [Rising Precious Metal Prices Don’t Stem Gold ETF Outflow]

ETFS Physical Platinum Shares

For more information on the precious metals, visit our precious metals category.

Max Chen contributed to this article.

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.