Lower-risk ETF opportunities may seem difficult to find. That said, risk is often in the eye of the shareholder.
For example, historical evidence suggests that platinum “typically” trades at a price 2/3 higher than gold. It may not shine like the yellow metal, but platinum is 30x more rare. That is one reason for the price premium.
At the moment, though, gold is roughly $1725 per ounce versus platinum’s $1625. The ratio is completely out of whack. In fact, platinum would need to climb roughly 70%… near $2,800 per ounce… to restore the historical relationship.
Wouldn’t platinum get killed in a precious metals sell-off? After all, many feel that gold is “bubbly.” (I am not one of them.)
Let’s assume that gold plummets to $1000 per ounce – a -42% shellacking. If everything eventually reverts back to its mean – if platinum and gold return to a mean historical ratio – then platinum would remain near its present spot price of $1625. No shellacking.
In other words, platinum may have limited downside risk and tremendous upside potential. Consider ETF Physical Platinum (NYSEARCA:PPLT) for a pure play or consider First Trust Global Platinum (NASDAQ:PLTM) for a basket of platinum producers.
Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.