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Platinum is Surging, but Why no Platinum ETF?

Posted by Sun on March 5, 2008
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Gold isn’t the only hot precious metal in town these days.

Spot silver surpassed the psychological $20 an ounce today to its highest level since October 17, 1980. Currently, silver is traded at $20.80/ounce (Kitco.com). So far this year, silver has gained more than 39%.

Then, there’s platinum which is also on fire since the beginning of 2008. Yesterday, platinum traded above $2300 an ounce in New York. Year to date, spot platinum has surged more than $750 an ounce.

As hot as platinum has been so far, I am wondering why there isn’t any platinum exchange traded fund (ETF) available. I searched in the past several times, but didn’t find any. There’s gold ETFs (GLD and IAU) and silver ETFs (SLV and DBS) (check out a list of precious metal ETFs), but nothing for platinum even after the metal keeps breaking record highs.

Then I read an article on ETFtrends today which explains why there’s no platinum ETF in US. According to Kevin Rich, CEO of DB Commodity Services:

“[Platinum] is not liquid enough to support an ETF,” is the simple answer. “There are not enough players transacting it.”

The last thing anyone would want, Rich says, is for a fund to take money in but find that it couldn’t buy the underlying asset. Platinum is scarce enough that it’s possible for an investment product to take away the supply. “When you bring in an ETF, you make sure the supply and demand of the commodity are still driving the market,” Rich says.

Gold, on the other hand, is in a different situation. For gold ETF such as StreetTracks’ GLD, the shares are backed buy the metal itself. The trust holds gold bars in bank vaults to support the shares issued to its clients (currently the trust holds 647.73 tonnes of gold, according to StreetTracksGoldShares.com). So by investing in GLD, investors owns gold without having to hold and store the precious metal themselves.

There probably isn’t such a large amount of platinum available for a company to create a platinum ETF without disrupting the market :)

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Categories : ETF, Investing

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8 Comments
March 5, 2008

I guess it might be time to get my wife’s engagement ring appraised again. It looks like it could be worth quite a bit more :D

Posted by Jeremy
March 5, 2008

No doubt she will get a good price if she decides to cash in :D

Posted by Sun
March 9, 2008

But least one bank offers notional platinum accounts (as I am sure to some bullion traders). Not the same of course, but good enough for most investment purposes.

Posted by traineeinvestor
March 10, 2008

Interesting analysis on platinum ETF’s. I think though that a better way for those metal etf’s is to buy futures contracts, rather than invest in the hard metal itself. That creates artificial supply contraints,but also creates expenditures like storage security etc. With futures contracts gold investors can earn some yield on the money invested, but will be subjects to rollover losses.

Posted by Dividend growth investor
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