Why Platinum And Palladium ETFs Are Breaking Out

Includes: PALL, PPLT, SPPP
by: Tom Lydon

Platinum and palladium exchange traded funds are outperforming gold and gaining momentum as traders see signs of an expanding global economy.

The ETF Securities Physical Platinum Shares (NYSEARCA:PPLT) gained 10.6% over the past three months and is currently trying to break out to its highest since 2011. Meanwhile, the ETF Securities Physical Palladium Shares (NYSEARCA:PALL) surged 25.5% in the last three months. In comparison, the SPDR Gold Shares (NYSEARCA:GLD) weakened 0.8% in the same period.

On Wednesday, platinum futures were at their highest level in four months while palladium futures were near their highest since September 2011, reports Lewa Pardomuan for Reuters.

Platinum and palladium have been outperforming gold on the improved economic outlook - both whites have heavy industrial applications, disruptions to mining operations in South Africa and dwindling Russian stockpiles that triggered supply fears. Meanwhile, the rally in riskier equities diminished the appeal of gold as a safe-haven asset.

The U.S. services sector expanded again last month, adding to a three-year run of growth. Meanwhile, European business optimism is at an eight-month high, which suggests a recovering Eurozone.

According to a Reuters survey, market observers expect palladium prices to hit a record average higher this year and platinum could post its best price performance in two years.

Platinum was trading around $1,735 per ounce Wednesday and palladium was at $762 per ounce.

"It is quite clear that this year, the demand will (exceed) supply. I think we are seeing steady buying actually," Yuichi Ikemizu, branch manager for Standard Bank, said in the article. "There's a steady flow into those metals from investors all around. I think we could try $1,750 for platinum and for palladium, the target is $800."

ETFS Physical Platinum Shares

Max Chen contributed to this article.

Disclosure: I am long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Tom Lydon's clients own GLD.

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