As the Metal Price Surges, Why No Platinum ETF?

Gold isn’t the only hot precious metal in town these days.

Spot silver surpassed the psychological $20 an ounce today to its highest level since October 17, 1980. Currently, silver is traded at $20.80/ounce (Kitco.com). So far this year, silver has gained more than 39%.

Then, there’s platinum which is also on fire since the beginning of 2008. Yesterday, platinum traded above $2300 an ounce in New York. Year to date, spot platinum has surged more than $750 an ounce.

As hot as platinum has been so far, I am wondering why there isn’t any platinum exchange traded fund available. I searched in the past several times, but didn’t find any. There’s gold ETFs (GLD and IAU) and silver ETFs (SLV and DBS) (check out a list of precious metal ETFs), but nothing for platinum even after the metal keeps breaking record highs.

Then I read an article on ETFtrends today which explains why there’s no platinum ETF in US. According to Kevin Rich, CEO of DB Commodity Services:

“[Platinum] is not liquid enough to support an ETF,” is the simple answer. “There are not enough players transacting it.”

The last thing anyone would want, Rich says, is for a fund to take money in but find that it couldn’t buy the underlying asset. Platinum is scarce enough that it’s possible for an investment product to take away the supply. “When you bring in an ETF, you make sure the supply and demand of the commodity are still driving the market,” Rich says.

Gold, on the other hand, is in a different situation. For gold ETF such as StreetTracks’ GLD, the shares are backed buy the metal itself. The trust holds gold bars in bank vaults to support the shares issued to its clients (currently the trust holds 647.73 tonnes of gold, according to StreetTracksGoldShares.com). So by investing in GLD, investors owns gold without having to hold and store the precious metal themselves.

There probably isn’t such a large amount of platinum available for a company to create a platinum ETF without disrupting the market.

Comments

[David Ricardo:]

Platinum ETFs should be outlawed before someone starts one. Platinum is so rare and so critical to environmental protection that it should not be wasted in ETF stockpiles. There are ample stockpiles of gold and silver to satisfy the ETF business.
Although a small amount of Platinum is used for jewelry and coins, the major use of Platinum is in industrial applications, and especially in catalytic converters to reduce auto pollution. Furthermore, most plans to convert autos from gasoline/diesel to hydrogen will entail use of platinum catalysts. It would be a tragedy if most of the world's Platinum winds up in bullion bars instead of catalytic converters.

2008 Mar 06 02:27 PM

[Rhona O'Con...:]

There is platinum ETF run by Zurich Kantonal Bank in Switzerland and a Platinum Exchange Traded Commodity run by ETF Securities based in London. Both were launched in Spring 2007

2008 Mar 07 07:09 AM

[LJ:]

There are platinum ETF's outside the US. You can buy PTPH listed in London. You can also buy other platinum derivatives (such as non-leverage platinum warrants) listed in other countries.

2008 Mar 09 04:29 AM