Commodities—including precious, rare and base metals—have been getting increased investor attention. We previously discussed several exchange-traded funds (ETFs) that give access to these assets (covered here, here, here, here, here and here). Today, we introduce two more funds with an emphasis on platinum.
The metal is part of the platinum group metals (PGMs), "a family of six structurally and chemically similar elements that are most valued for their wide range of industrial, medical and electronic applications."
Within PGMs, the other five metals are palladium, rhodium, iridium, osmium and ruthenium. These rare resources are found in the earth's crust, typically as nuggets and grains. Today, most commercially-produced platinum comes from South Africa, which has about 80% of the world's platinum reserves. Next in line are Russia, Zimbabwe, the U.S. and Canada.
The Royal Society of Chemistry highlights:
"Platinum is used extensively for jewelry. Its main use, however, is in catalytic converters for cars, trucks and buses. This accounts for about 50% of demand each year."
A catalytic converter is part of a vehicle's exhaust system that controls emissions.
In addition, this rare metal is used in chemicals and electronics industries, as well as for making "optical fibres and LCDs, turbine blades, spark plugs, pacemakers and dental fillings. Platinum compounds are important chemotherapy drugs used to treat cancers."
Platinum’s various uses in different industries makes the price of the metal sensitive to business cycles. Investors also tend to regard platinum as a potential inflation hedge. With that information, here’re today’s two funds, both run by Standard Life Aberdeen (LON:SLA) (OTC:SLFPY).
1. Aberdeen Standard Physical Platinum Shares ETF
Current Price: $113.25
52-Week Range: $68.01 - $122.48
Expense Ratio: 0.60% per year
The Aberdeen Standard Physical Platinum Shares ETF (NYSE:PPLT) enables investors to participate in the moves in the price of physical platinum. It directly owns platinum bullion and vaults it in London. The vault is inspected by an auditor twice a year (including once at random). The fund started trading in January 2010, and assets under management are over $1.5 billion.
According to the metrics from the World Platinum Investment Council, "The investment case for platinum became increasingly compelling in 2020… Demand in 2021 is forecast to grow by 3%.”
So far this year, PPLT is up close to 12%. As price moves in gold and silver have shown in recent months, precious metals tend to be volatile, and their prices zigzag. The spot price for platinum is currently around $1,200 per troy ounce, a level that might act as resistance in the near term. However, those investors with a two- to three-year horizon could consider buying the dips in the fund.
On a final note, in March 2008, platinum saw its record level at around $2,308.80 per troy ounce. At the time, gold spot price was around $1,000. Now, gold is trading around $1,770. Many industry analysts point out that by historical levels, platinum is cheap vis-à-vis its peers and, as both a precious and industrial metal, has significant upside potential.
2. Aberdeen Standard Physical Precious Metals Basket Shares ETF
Current Price: $97.01
52-Week Range: $75.79 - $105.13
Expense Ratio: 0.60% per year
The Aberdeen Standard Physical Precious Metals Basket Shares ETF (NYSE:GLTR) currently invests in four precious metals. As of Mar. 31, it held 661 bars of gold, 506 bars of palladium, 264 bars of platinum and 10,015 bars of silver. These bars are kept in vaults in London. The fund started trading in October 2010.
As of the same date, the fund's net assets stood at $865,740,048.2. In terms of weighting, gold had the highest slice ($449,818,444.3 @ $1,691.06/oz). Next in line were palladium ($139,637,539.10 @ $2,625/oz), platinum ($41,899,404.8 @ $1,182/oz) and silver ($234,384,660 @ $24.0/oz).
Palladium is regarded as platinum's sister metal. It is also a critical component in catalytic converters and is also used in jewelry-making, electronics and dentistry. Due to the rise in the price of platinum and palladium, both the U.S. and the UK have recently seen a jump in the number of thefts of catalytic converters.
Regular readers would know that we are currently bullish on gold and silver for the rest of the year. As a more diversified fund, GLTR could interest investors who are not yet ready to allocate full capital into platinum or palladium individually.