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.

Platinum price

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 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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One Response to “Invest in Platinum with ETF Platinum Trust”

  1. carlo |  Apr 29, 2011 at 10:53 pm

    Investment Grade Molybdenum

    Commodities are physical substances like grains, food and metals. An investment is the purchase of a financial product or other item of value with the expectation of favorable returns in the future.

    Well, I prefer metals for preservation of my wealth. The question is what metal would you pick to preserve your wealth? Now the next thing to keep in mind is not to be biased in any way. That is, to buy a certain metal because someone tells you to, or to buy a certain metal because it is on an upward price trend or buy a metal because you read an interesting article on it.

    #1 on my shopping list. I look at is a the ability of a metal to actually promote or enable life of plants and animals on this planet. This means that you can actually grow food with it or grow trees. You can actually use the metal by sprinkling the powderized form on your soil and let the microbes in the soil slowly break down the metal and make it available for the plants to consume. Hydroponic or Aeroponic growing of food uses about 17 life giving elements that are added to the water to give complete nutritional support for plants.

    Unfortunately, there are only 7 elements of the 17 needed for plants that are an actual “metal”. These are called transition metals. Transition metals are known for their ability to conduct electricity, their hardness, high density, malleability (a material that can be worked with or hammered into flat sheets), ductility (able to be produced into a thin wire).

    These 7 investment grade metals are Molybdenum, Cobalt, Copper, Zinc, Manganese, Iron, Nickel. Nickel is documented as a essential nutrient in some plants. Nickel is not used in some high-end hydroponic formulas.

    #2 on my shopping list. I now have 7 transition metals that are used in growing food and are capable of being in my metal portfolio. But, I only want one metal. I will now consider the amount of this metal available on Earth. The next step would be the abundance of the metal or scarcity of it. Here is a list of these 7 metals and the amount in parts per million in the Earth’s crust.

    Molybdenum 1 ppm Molybdenum is most valuable here because of scarcity

    Cobalt 25 ppm

    Copper 60 ppm

    Zinc 70 ppm

    Nickel 84 ppm

    Manganese 950 ppm
    Iron 56300 ppm

    #3 on my shopping list is the melting point. I want a metal that can withstand high working temperatures. There is something called metal “creep” and that is the expansion or deformation of metals when they start reaching temperatures near the melting point. I like metals that don’t creep or change shape in high temperature conditions eg: Jet engines, Furnaces or anywhere where safety is priority.

    Molybdenum has the highest melting point of any life giving metals. Molybdenum has the sixth highest melting point of any element on Earth, which is incredible!

    Molybdenum 4753 Degrees Fahrenheit Melting Point

    Iron 2800 Degrees Fahrenheit M.P.

    Cobalt 2723 Degrees Fahrenheit M.P.

    Nickel 2651 Degrees Fahrenheit M.P.

    Manganese 2275 Degrees Fahrenheit M.P.

    Copper 1984 Degrees Fahrenheit M.P.
    Zinc 787 Degrees Fahrenheit M.P.

    #4 on my shopping list. The metal is an investment so I Do Not want it to rust, oxidize or corrode. If this happens you can surely say goodbye to your investment. Molybdenum does not react with water or air at room temperature and will not corrode. Molybdenum will keep a beautiful lustre (silvery blue). Copper and iron are definitely OFF my shopping list in this category.

    Research this incredible metal for yourself, it has many uses.
    Carlo Biancardi (London, Ontario) April 2011