Auto Data Release Brings ETFS Physical Platinum ETF Into Focus

 |  About: ETFS Physical Platinum Shares ETF (PPLT)
by: Eric Dutram

As 2011 gets underway, investors have bought up securities across the board giving a nice boost to American equities to start the new year. While the early leaders of the year were in the basic materials and financial sectors, automakers have also continued their strong performance, outpacing a variety of their counterparts in the consumer goods sector. However, despite this surge as of late which has been the result of strong sales and rising consumer confidence, investors will likely hone in on a key piece of data which will set the tone for the auto sector to start the year.

That crucial data point is the domestic auto sales figures for December which analysts currently forecast to come in at an annual rate of 9.2 million units. This represents a slight increase from the November figures in which reports showed sales of 9.1 million units (at an annual rate) suggesting that the recovery in the auto manufacturing industry is slowing starting to gather steam, potentially creating greater domestic demand for a variety of crucial car parts such as steel, rubber, and even platinum.

Platinum presents an especially interesting case for investors since the precious metal has seen its price rise by over 10% in 2010, a nice increase in any year, but far behind the rest of the precious metals which saw much more robust increases including a near 84% gain from its palladium-focused counterpart PALL. Since just over half of the world’s platinum goes into producing exhaust capturing catalytic converters which are required on all U.S. cars, a large uptick in car sales could be just the boost that PPLT needs to begin catching up to its precious metal peers in terms of gains to investors.

Due to this data release, and as a result of platinum’s main use as a catalytic converter, we have made the ETF Securities Platinum Shares Trust (NYSEARCA:PPLT) today’s ETF to watch. The fund invests in bars of platinum and stores them securely in vaults in Europe while charging investors 60 basis points a year for this service. PPLT has attracted a great deal of investor interest despite being relatively new, having amassed more than $750 million in assets and trading roughly 76,000 shares a day. We expect that volume level to surge today as traders maneuver to position themselves after the data release with a surge in auto sales likely leading to a small boost in the demand for platinum and thus a price increase for the popular fund from ETF Securities. Should the sales disappoint, however, it could spell doom for platinum’s price in the near term and cause a sell off that may push PPLT down significantly in the first week of 2011.

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Disclosure: No positions at time of writing.

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