ETF Securities Plans a Physical Palladium ETF

London-based ETF Securities, one of the largest European ETF issuers, has filed the prospectus for what would be its third U.S.-listed ETF and the first physically-backed platinum ETF on the NYSE Arca Exchange. The ETFS Platinum Trust (PALL) will seek to reflect the performance of the price of physical palladium, offering a cost-effective and convenient way for investors to gain exposure to one of the world’s rarest metals.

Over half the world’s palladium use related to the manufacture of catalytic converters, which convert harmful gases from automobile exhaust into less harmful substances. As consumers and regulators have moved towards increasingly stringent emissions regulations from the U.S. automotive industry, demand for palladium and platinum, another metal found in converters, has soared.

Palladium Industry

Palladium, platinum, and four other metals make up the platinum group metals (PGMs), which have a variety of industrial uses as well as uses as a store of value to investors. PGMs are found primarily in South Africa and Russia – Russia is the world’s largest palladium producer while South Africa is the leader in platinum production. These two countries accounted for nearly 80% of PGM supply in 2008.

Automotive customers accounted for the largest portion of palladium demand at 55% in 2008, followed by industrial users (chemical, electronics, etc.) at 23% and jewelry demand at 9%. Palladium investors range from sophisticated hedge funds and mutual funds to amateur coin collectors.

In its prospectus, ETF Securities notes that palladium prices may be influenced by a number of factors, including:

• Hedging activity by palladium producers
• Attitudes of speculators towards palladium
• Interest rate differentials between cost of money and cost of palladium
• Demand from the global automotive industry

As uncertainty has mounted and the U.S. dollar has plummeted, many investors have turned to precious metals as a store of value. These holdings are dominated by gold ETFs (led by GLD) and silver funds (such as SLV) that have billions of dollars in AUM. ETF Securities has broken into this field in recent months, attracting huge cash flows to its physically-backed gold (SGOL) and silver (SIVR) ETFs.

There are several ETFs offering exposure to platinum, including the iPath Dow Jones-UBS Platinum Trust ETN (PGM) and the E-TRACS UBS Long Platinum ETN (PTM). But these products both rely on futures contracts to achieve their objectives as opposed to physically-holding platinum.

The prospectus for PALL did not include an expense ratio. ETF Securities has been successful in gaining market share from larger, more established competitors in part because of its lower cost structure. SGOL has an expense ratio of 0.39% (compared to 0.40% for GLD) while SIVR charges 30 basis points (compared to 50 for SLV).

View the prospectus for PALL here.

Disclosure: No positions at time of writing.

Comments

[Mark Anthony:]

Thanks for bringing in this exciting news on palladium. It has been a bit of waiting but finally the ETF Securities palladium fund is here now.

This is very bullish for palladium. Read also a recent Resource Investor article on palladium:
www.palladiuminvesting...

You should also mention the stocks of SWC and PAL. These two North American mines are the world's ONLY primary palladium producers. I hold a very large position in SWC and some PAL.

Oct 22 04:13 AM

[Bob Mayo:]

"The ETFS Platinum Trust (PALL) will seek to reflect the performance of the price of physical palladium." I hope not!

The editing of this article did not make it clear: they filed for both Platinum (PPLT) and Palladium (PALL) ETFs.

Platinum: www.sec.gov/Archives/e...

Palladium: www.sec.gov/Archives/e...

Oct 22 04:33 AM

[dieuwer:]

Let's take the hype out of Palladium investment:

Price of Gold, Silver, and Palladium in January 2001: $255, $4.50, and $1079, respectively.
Price of Gold, Silver, and Palladium on October 21, 2009: $1058, $17.70, and $342, respectively.
Gain/Loss of investing in Gold, Silver, and Palladium over the period 2001 - 2009: 415%, 390%, and -68%, respectively.

YEAH, Palladium is a great investment...(not).

Oct 22 08:49 AM

[Gaucho:]

The problem with these ETFs is that they are all paper and WHO KNOWS what % of this "Claimed" metal is in the vaults. GLD and SLV have legal BS statements so that the crooks can run away with you holding the bag once it is discovered that there is only a few % points of metal backing all the outstanding shares.

Palladium is one metal that you shold buy in bars and store in a safety deposit box.

Oct 22 02:17 PM

[The Recusant:]

Gaucho -- Not all ETFs are created equal. Also mentioned in the article was GTU and CEF, both of which have independent audits twice a year and post their physical holdings. GTU normally carries 90% bullion in their vaults with only 10% in paper on future deliveries. I sold my GLD long ago in favor of GTU's more secure holdings, although a buyer of GTU will usually pay a higher premium over spot. But the peace of mind is worth it.

Oct 22 02:43 PM

[Bob Mayo:]

Recusant, I've heard those arguments but never understood them. Is there some reason to trust GTU's independent audits and bar lists more than GLD's independent audits and bar lists? Is it just that HSBC is such a huge bank with lots of complicated dealings?

Oct 23 02:07 AM

[The Recusant:]

Bob Mayo -- GLD releases a gold inventory list that many have questioned because of duplicate bar numbers and most recently, a dramatic drop in the number of actual bars listed when they purportedly should be holding more. Something always seems suspicious with their accounting techniques. GLD would be fine if you want to make quick deals on an increase in gold prices (I have in the past and will probably do it again in the future), but as an investment for the long term I want my shares outside of the U.S. and in something I can trust better.

Oct 23 03:33 PM

[Analyste de...:]

Palladium was still trading near it's 10 year lows when I screeched at clients to BUY, BUY, BUY the bullion back in April ($USD 230./oz) Prices being relative, Palladium was cheap then!

1) In 1982-83, the avg of USD$ 87./oz was the 25 year LOW: that's $134. in Jan 2009 inflation-adjusted (CPI) Dollars. In REAL inflation-adjusted Dollars, that's more like $154.

2) Palladium was trading as low as $164.-179. in December-January, that's our current floor. If the historic avg price was about $130. (1983-97) that's about $173. in Jan 2009 inflation-adjusted (CPI) Dollars. In REAL inflation-adjusted Dollars, the historic range of $130. more like $219. In 2009, Palladium was trading near $220. until mid-May.

3) For the last decade or so (1997-2009) the avg price was $335. Palladium is trading at that level right now, so it still looks reasonably priced relative to historic averages.

Oct 23 07:11 PM

[Skaiste:]

Did you even look at the reasons of 2001 palladium spike???
Your comment falls in the same category: price of gold 1981: $250,
price of gold 2000: $250. Year 2000 conclusion: gold is for morons.

Palladium can do almost as much as platinum and even more. That being said, a metal 10 times more rare than gold, so many current uses, and promising future uses seems like no brainer


On Oct 22 08:49 AM dieuwer wrote:

> Let's take the hype out of Palladium investment:
>
> Price of Gold, Silver, and Palladium in January 2001: $255, $4.50,
> and $1079, respectively.
> Price of Gold, Silver, and Palladium on October 21, 2009: $1058,
> $17.70, and $342, respectively.
> Gain/Loss of investing in Gold, Silver, and Palladium over the period
> 2001 - 2009: 415%, 390%, and -68%, respectively.
>
> YEAH, Palladium is a great investment...(not).

Oct 24 12:52 AM

[Mark Anthony:]

Yes!

The 2000/2001 palladium spike was mainly due to a FALSE rumor that Russian government was going to temporarily suspend strategic stockpile palladium sale. The market knew that without up to 2 million ounces per year Russian government stockpile sale, the global palladium market could be in serious deficit. FORD was so panic that they bought one million ounces of palladium near the price top of $1100. Some people denounce FORD for a bad move causign nearly one billion dollar loss of write down.

But think on the otherside, had FORD not hoard extra palladium and the shortage came out to be real, and FORD was forced to halt vehicle production, the loss will be far far more than $1B. So I think FORD did nothing wrong, they merely paid $1B for a necessary insurance.

Today, instead of a rumor, the Russian government palladium stockpile has really finally depleted after nearly two decades of destocking. This has long been speculated and has now been confirmed by Nirilsk at least twice recently:

www1.investorvillage.c...
and more recently:
www.bloomberg.com/apps...

I believe this new palladium bull run will be far more spectacular than the last one in 2000/2001

Three things to invest in:
The physical palladium metal, and SWC and PAL stocks.

On Oct 24 12:52 AM Skaiste wrote:

> Did you even look at the reasons of 2001 palladium spike???
> Your comment falls in the same category: price of gold 1981: $250,
>
> price of gold 2000: $250. Year 2000 conclusion: gold is for morons.
>
>
> Palladium can do almost as much as platinum and even more. That being
> said, a metal 10 times more rare than gold, so many current uses,
> and promising future uses seems like no brainer

Oct 26 02:12 AM

[Albertarocks:]

Mark, thank you for coming here and telling us about these things that 99% of us wouldn't know otherwise. You're a valued contributor for sure.

Oct 26 02:36 AM

[Delojozafado:]

Finally it's here ? Well actually it is not here! and it is now 11/23 !!!! The PHPL.L/ETMSF has been cooking along in London. Shoulda woulda coulda bought it and paid the extra $50 of commission to my broker. Instead I was rejoicing in the good news that the palladium fund is now going to trade here in the US...NOT!!!! This phony assertion that ETFS was going to expand this fund to the US markets has been going on since March, when these articles about a physical holder palladium fund were first floated. Palladium has been moving sharply higher in the last 8 weeks off a dip to below $300. Now you can not touch a Maple Leaf on E-Bay for less than $400. Shoulda just sent my $4K off to Northwest Terr Mint two months ago and got a sheet of Maples and be done with it. I am still waiting for Santa Claus and the Easter Bunny to arrive too!

Nov 22 08:11 AM

[Delojozafado:]

It's now 12/1 and Palladium is about to break through $400 as gold knocks down the $1200 door and the BOJ intervenes with some "Q" easing to "defend" the yen. No PALL ETF it is just not happening. Woulda coulda shoulda ......

Dec 01 08:05 AM