UPDATE: ETFs Prompt 'Sea Change' In Platinum, Palladium Markets -Kitco
September 14 2011 - 5:37PM
Dow Jones News
Physical metal-backed exchange-traded funds sparked a "sea
change" in platinum and palladium markets by bringing in investors
who otherwise wouldn't have bought the metal, said Jon Nadler,
senior metals analyst with Kitco Metals Inc. North America.
Speaking at the CME Group Platinum Group Metals Seminar at the
New York Mercantile Exchange, Nadler said that platinum and
palladium ETFs removed investment barriers to European investors
and augmented demand for the metals among historic investors in
U.S. and Japan.
Investor holdings of platinum group metals have been on the rise
since 2007 as low interest rates, a lower dollar and worries about
future inflation fan demand for hard assets.
The advent of the platinum and palladium ETFs "marks a pivotal
development" in the platinum group metals market, Nadler said,
adding that currently there are five platinum and five palladium
ETFs available.
European investors were well aware that platinum and palladium
offered a chance to diversify away from gold and protect their
portfolios, but the high taxes made the cost of such investments
prohibitive.
"For such investors platinum group metal ETFs could not have
come at a better time," Nadler said.
These products circumvent large value-added taxes that
discouraged European investors from buying certain types of
platinum and palladium bars and coins.
Historically, Japan and the U.S. have dominated investment in
physical platinum and palladium. Both groups of investors consider
the tight mine supply and growing demand from industrial users a
"compelling case for a continuing robust level of investment
activity," he said.
However, while Japanese investors also tend to focus on price
levels, U.S. investors tend to buy platinum as a hedge against a
future increase in inflation and as an alternative to gold.
The ETFs, many of which were launched in 2007 and after, buoyed
investment demand for these metals and helped platinum prices rise
57% even as the platinum market faced a supply surplus of about
850,000 troy ounces.
"Clearly, the ETF investment niche took care of a good portion
of the surplus present in the marketplace," Nadler said.
-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095;
tatyana.shumsky@dowjones.com
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