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Sprott Physical Platinum & Palladium Trust: Autocatalyst Demand Uncertainty To Weigh On Sentiment


  • SPPP invests in physical bullion at a ratio of ~82% palladium and ~18% platinum.
  • The platinum group metals 'PGMs' face balancing bullish and bearish trends considering positive sentiment towards precious metals against more uncertain industrial demand.
  • SPPP is a good option to gain exposure to price trends in PGMs in a structure that has some advantages over owning physical including preferential tax treatment .
  • This idea was discussed in more depth with members of my private investing community, Core-Satellite Dossier. Get started today »

The Sprott Physical Platinum & Palladium Trust (NYSE:NYSEARCA:SPPP) is a closed-end-fund with $132 million in total assets. As the name implies, the fund invests in both platinum and palladium with shares backed by corresponding physical bullion. Palladium, in particular, has gained importance among precious metals considering its surge over the past year to a high above $2,800 per ounce and now more valuable than platinum and gold.

Indeed, a combination of tight global supplies and increasing use in more advanced catalytic converters from the automobile industry have represented strong fundamental tailwinds. On the other hand, the current global slowdown and more recent macro uncertainties threaten to reverse sentiment towards PGMs as industrial metals. We expect the conflicting factors to generate higher volatility for the year ahead but think SPPP has a solid structure to gain long-term exposure.


(Source: finviz.com)

SPPP Trust Background

The unique aspect of this fund is that all shares are fully backed and allocated to physical bullion in custody with the Royal Canadian Mint owned by the Government of Canada, recognized for its "AAA" credit rating. In this regard, beyond a financial instrument, SPPP is an alternative to owning platinum and palladium bars or coins. There is an option for delivery, although it requires a minimum holding of 25,000 units, or investment value of roughly $425,000 at current prices, and additional fees. The fund notes that since inception through the end of 2018, over 18,000,000 units have been redeemed for delivery highlighting the popularity of the feature.

There is a tax advantage to this fund structure for U.S. investors, as the long-term capital gains tax on holding SPPP is 15% (20% for higher tax bracket individuals) compared to the 28% normally applied to precious metals ETFs and direct physical investments. While this may not be relevant to some short-term traders, we think this format makes

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This article was written by

Dan Victor, CFA profile picture
Expert market insight that gets the direction right

BOOX Research is now Dan Victor, CFA

15 years of professional experience in capital markets and investment management at major financial institutions.

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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