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ETFs to Ride the Platinum Rally

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The price of platinum has been on the rise lately on surging demand and tight supply conditions. This has sent a few platinum ETFs to new highs. In fact, abrdn Physical Platinum Shares ETF (PPLT - Free Report) and GraniteShares Platinum Trust (PLTM - Free Report) are hitting new highs while iPath Series B Bloomberg Platinum Subindex Total Return ETN (PGM - Free Report) is also rising. The trio has a Zacks ETF Rank #3 (Hold).

A combination of factors like power cuts in South Africa, the war in Ukraine and increased production of hybrid cars are driving the precious metal higher. Weakness in the dollar also lent support to the metal. Investment bank UBS lifted its price forecast for platinum in 2023, estimating that the precious metal will cost $1,150 per ounce for June, up from the previous estimate of $1,100, and will reach $1,200 per ounce in December.

Supply/Demand Imbalance

The platinum market is forecast to be in deficit after two consecutive years of significant surpluses. According to the World Platinum Investment Council (“WPIC”), a global deficit of platinum in 2023 will be deeper than previously thought, and the shortage could persist for years. The global supply is expected to rise only by 3% in 2023, leaving the market with a deficit of 556,000 troy ounces compared with the previously expected deficit of 303,000 troy ounces.

A worsening of electricity supply shortages in major producer South Africa and sanctions-related operating challenges in Russia are threatening global supply (see: all the Precious Metal ETFs here).

On the other hand, the demand for platinum is projected to grow by 24% as some part of the auto sector is replacing palladium with cheaper platinum, and industrial demand is increasing, per WPIC. The automotive industry, mainly catalytic converters designed to limit greenhouse gases from exhaust fumes, is a big driver of demand in the platinum market, accounting for nearly 40% of global demand. Pick-up in global economic growth, stricter emissions rules as well as rise in auto sales globally will continue to propel demand for the metal. Other emerging applications, such as fuel cells, are creating new opportunities for platinum demand.

The metal will also be supported by potential demand for platinum-based fuel cell stacks as well as increased loadings, particularly for diesel vehicles. Platinum has numerous industrial applications in biomedical research, specialty electronics and green technologies. Industrial demand is expected to increase 12%, while investment demand will also improve on a strong appetite for bars and coins. Investors have turned to the precious metal as a store of wealth against the potential inflationary pressure and recession fears.

Aberdeen Standard Physical Platinum Shares ETF (PPLT - Free Report)

The fund seeks to match the price of platinum. It has amassed $1 billion in its asset base and trades in a good volume of about 87,000 shares a day. The fund charges 60 bps in annual fees (read: Platinum ETF Hits New 52-Week High).

GraniteShares Platinum Trust (PLTM - Free Report)

This ETF also tracks the performance of the price of platinum and is physically backed in a vault domiciled in London, United Kingdom. It has AUM of $48.7 million and charges 50 bps in annual fees. The fund trades in an average daily volume of 46,000 shares.

iPath Series B Bloomberg Platinum Subindex Total Return ETN (PGM - Free Report)

With AUM of $6.4 million, this fund follows the Bloomberg Platinum Subindex Total Return, which reflects the returns that are potentially available through an unleveraged investment in the futures contracts on platinum. It charges 45 bps in annual fees and trades in a paltry volume of under 200 shares on average.

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