Invest in Platinum with ETF Platinum Trust
More than two years ago, I had a post on why there’s no exchange-traded fund (ETF) for Platinum when the price of the metal was soaring. Back then, the explanation was, the scarceness of platinum made it difficult to form a GLD (SPDR Gold Trust) like fund that’s backed by the physical metal without driving up the price. I thought it was a good reason when the price of platinum was more than $2,300 an ounce at that time.
Since then, the price of platinum has come down a lot, trading at $1,690/ounce at yesterday’s close. And the way that investors can invest in platinum has also changed completely with the introduction of the first physically backed platinum ETF early this year.
On January 8th, ETF Securities Ltd launched ETFS Physical Platinum Shares (PPLT), the first exchange-traded fund that’s backed by the physical metal, just like the way GLD is backed by the bullion, though GLD is much bigger in assets. Currently, PPLT holds about 598,104 ounce of physical platinum, comparing to GLD’s holding of 36,685,623 ounces of gold. However, PPLT is not inferior in performance. Since the inception, PPLT has gained more than 6.7%, while GLD is almost flat during the same period of time.
As you can see from the above chart, platinum price has more than doubled since October 2008, but it’s still relatively cheap compared to the price of gold, measured by the platinum-to-gold ratio. For example, in May 2008, when the platinum price was around its peak, one ounce of platinum could buy 2.38 ounce of gold. At yesterday’s prices, platinum $1,690/ounce and gold $1,136/ounce, the ratio is at 1.48. The price of platinum has to go up a lot to come close to the highest ratio of 2.43 in 2001, according to Bloomberg.com. Meanwhile, the supply-demand relation favors platinum over gold. Unlike gold, more than 50% of global consumption of platinum come from the auto catalyst sector. With surging demands for automobiles in China, which overtook the U.S. as the largest auto market last year, and the recovery of the U.S. auto industry, the supply-demand balance for platinum is tighter than that of gold as the annual global production of platinum is only about 5% to 7% of the gold’s production.
The introduction of PPLT makes it easier for investors to invest in platinum without physically owning the metal. PPLT has an expense ratio (ER) of 0.60%. Each share of PPLT represents 1/10 of an ounce of platinum less fees. Shares of PPLT can be purchase at any discount brokers.
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