ETF Securities recently announced the formation of an ETF that would purchase physical platinum on the open markets and store it for investors in hopes of positive investment returns. The fund would trade on the London stock exchanges and comes three days after a similar announcement by the Zurich Cantonal Bank that claims to be listing a similar ETF on the Swiss exchange starting May 10th.
These announcements are a continuation of the red hot investment trend of ETFs based on hard assets. In the past few years, funds that purchase the typical commodities of oil, gold, and silver have become increasingly popular. Now, with the announcement of the new platinum ETFs, investors interested in some of the more exotic natural resources plays have the ability to get involved in ways they were not previously able to.
Platinum is one of the smallest markets that is traded on futures exchanges. It is estimated that the entire world’s supply would fit into a box no bigger than 17′ x 17′ x 17′. Being such a small market, there is often very low liquidity on both the futures and physical delivery markets. With such market dynamics, the introduction of these investment vehicles may have a dramatic impact on the price of platinum. Any reduction in supply due to physical platinum buying by these ETFs could move the price of platinum up from today’s price of $1,300/oz. Among the most significant aspects of the current platinum market is that today, less than 1% of worldwide demand for platinum comes from the investment community. That may change significantly after the initial launch of the Swiss fund on May 10th.
Platinum has responded strongly with the anticipation of the ETF launch. Since March 5th, prices have risen approximately 9%, on a very steady incline. It is likely that over the course of the next two weeks, increased anticipation may cause platinum prices to rise in an even more dramatic fashion. The month of May could prove to be very profitable for many platinum investors.
Source: The Commodity Investor