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Platinum and palladium ETCs approach USD1bn under management


Exchange-traded commodity provider ETF Securities says rising demand for platinum and palladium ETCs has brought the value of physical metal held by the products to USD880m.

Exchange-traded commodity provider ETF Securities says rising demand for platinum and palladium ETCs has brought the value of physical metal held by the products to USD880m. The ETCs now hold 361,540 ounces of platinum and 220,890 ounces of palladium, equivalent to around 5 per cent and 2.5 per cent of annual world demand respectively.

Platinum and palladium prices have been benefiting from investor demand for assets including commodities that are uncorrelated to equities. ETF Securities says precious metal ETC assets have grown by more than 1,000 per cent in the past 12 months, from some USD200m to USD2.2bn.

ETFS Physical Platinum has been a major beneficiary of this trend, with total assets increasing by 265 per cent to USD740m since the end of last year. Its price has risen 39 per cent so far this year and by more than 60 per cent over the past 12 months, becoming the most popular individual commodity in 2008.

Platinum now makes up about 15 per cent of total ETC assets and 38 per cent of physical precious metal assets, and so far this year has contributed 54 per cent of all physical precious metal ETC inflows.

Palladium prices have tended to follow platinum, with ETFS Physical Palladium’s price gaining 21 per cent so far this year. Trading in palladium has been used to benefit from short-term price differentials between platinum and palladium. Total assets in ETFS Physical Palladium have increased by over 750 per cent to USD85m since the end of last year.

Investors can also gain exposure to physical platinum and palladium through ETFS Physical PM Basket, a basket of four physical precious metals including a 21 per cent allocation to platinum and a 12 per cent allocation to palladium that has seen assets double this year to USD120m.

ETF Securities’ recently-launched range of short and leveraged ETCs based on the Dow Jones-AIG Commodity Indices includes ETFS Short Platinum and ETFS Leveraged Platinum. The firm now has 16 precious metal ETCs offering a choice of physical, long, leveraged and short exposure to platinum, palladium, gold, silver and a basket of metals.

ETCs are traded in three currencies – euros, US dollars and sterling – and listed on five European exchanges, the London Stock Exchange, Euronext Paris, Euronext Amsterdam, Deutsche Börse and Borsa Italiana. Of overall ETC trading volumes exceeding USD600m per week, precious metal ETC trading represents around 30 per cent, having grown from USD30m to around USD200m so far this year.

‘The success of our platinum and palladium ETCs has been overwhelming,’ says ETF Securities chief operating officer Nik Bienkowski. ‘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.

‘Since May 2007 platinum has been one of the most popular ETCs and ETFS Physical Platinum has been the most popular individual commodity in 2008. Over USD880m of physical platinum and physical palladium is held on behalf of ETC investors and we expect this to reach USD1bn in the not too distant future.’

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