Platinum ETFs Platinum and palladium exchange traded funds (ETFs) are reflecting the love investors have for metals that do much more than look pretty, according to a report in Wall Street Journal. Since ETFs that hold physical platinum were launched by London's ETF Securities last year, the price of platinum has risen 52% and palladium is up 20%.
Fund companies looking to harness that growth have been launching a number of new products this year, including: iPath Dow Jones-AIG Platinum, Launched on June 24, E-TRACS UBS Long Platinum, launched on May 9, E-TRACS UBS Short Platinum, Launched on May 9, ELEMENTS MLCX Precious Metals, Launched on April 4; holds 32% platinum; 52% gold; 8% silver and 8% palladium But unlike ETFs for platinum, the ETNs don't hold the metal, which leaves the market unaffected. Instead, they buy or sell contracts in the futures market to replicate price movements. Some have noted that demand for platinum has been tapering off, driven lower by the high prices. For years now, automakers have been replacing platinum with palladium, which isn't as pricey.
Some automakers are looking to go even cheaper than that, as one mining company has developed a catalyst that uses silver for diesel-fueled engines. Fundamental factors to support prices in 2008 are Automotive demand likely to grow as emerging economies offset weak US performance, effects of high prices in early 2008 not seen yet but jewellery demand to be lower, exchange traded funds (ETF) activity may accentuate volatility, South African supply problems will impact output but this could still rise from 2007 levels, and therefore markets expected to remain in deficit. Looking ahead, the ability of the South African mining industry to stem the loss of production from its recent challenges will be "vital to the market balance.
Industry-wide platinum group metal production in 2008 will likely be "little higher" than in 2007. Johnson Matthey said it's "likely" that demand for platinum will grow in 2008, though it warned any reduction in economic growth would soften demand for industrial metals. It expects platinum to trade in a wide range from $1,775 to $2,500 in the next six months. Futures prices for platinum touched a record level of nearly $2,300 an ounce on the New York Mercantile Exchange in March. The large supply/demand imbalance in the platinum market and the extreme price volatility that's been an almost daily feature for the last three months is not sustainable over the long term. Precious metals including platinum have drawn investors seeking protection against climbing consumer prices and a weakening dollar.
Platinum Futures in MCX The Multi-Commodity Exchange of India Ltd (MCX) in June 2008 had launched a Platinum futures contract, taking cues from overseas markets where the metal rebounded on supply worries. Analysts said that the launch is appropriate considering the global supply scenario. Other analysts said the contract may remain illiquid with few trading it as the physical consumption of the white metal is low in India owing to its high price.
