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Hedgeweek Comment: Platinum enthuses investors in exchange-traded products

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Platinum has emerged as the most popular commodity in 2008, with platinum and palladium exchange-traded commodities approaching the USD1bn mark for investment this year.

Platinum has emerged as the most popular commodity in 2008, with platinum and palladium exchange-traded commodities approaching the USD1bn mark for investment this year.

The prices of both metals have been benefiting from investor demand for commodities and assets that are uncorrelated to equities. As a result, precious metal ETC assets have grown by more than 1,000 per cent in the past 12 months, reaching a total of USD2.2bn.

ETF Securities has seen demand for platinum and palladium ETCs rise sharply, bringing total ounces under management to USD880m, and the firm expects the total to reach USD1bn in the near future. In addition, investment bank UBS is also poised to launch two exchange-traded notes offering long and short exposure to platinum.

Unlike exchange-traded funds, ETNs do not purchase physical platinum to back the number of shares sold, but offer another channel that gives investors exposure to this fundamentally strong market.

Says Nik Bienkowski, chief operating officer of ETF Securities: ‘Substantial interest has come from investors who have sought safe havens from the continued uncertainty facing most traditional asset classes. Investors have also been moving into precious metals as a hedge against rising inflation and potential further weakening of the US dollar.’

With growing demand for commodities and the hedging quality that they offer, hedge funds are keen to find out what the next big thing will be.

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