Platinum, palladium ETFs to begin trade in U.S. Friday


By Frank Tang
Thursday, January 7, 2010

NEW YORK -- ETF Securities Ltd's first U.S. platinum and palladium exchange-traded funds, set to be launched on Friday, are expected to attract a rush of investment dollars into a highly liquid U.S. market.

ETFS Physical Platinum Shares (PPLT) and ETFS Physical Palladium Shares (PALL) will begin trading on the NYSE Arca platform, where many other ETFs are also listed, NYSE Euronext said on Thursday. Analysts expected the new exchange-traded products to give platinum group metals a shot in the arm and fill some of the void left by lower demand from the beleaguered auto sector.

"Everybody tends to rush into gold when they think of precious metals. Platinum group metals have the added benefit of a high level of industrial input," said Bill O'Neill, partner at New Jersey-based LOGIC Advisors. "With the growth of car usage in India and China, demand for platinum group metals should be quite buoyant. It's going to be a metal that attracts a lot more attention in the future."

Platinum is used mainly in autocatalysts to clean exhaust fumes from vehicles. That accounts for more than 60 percent of total platinum demand. Investment in platinum has been rising even as demand from the auto industry fell for the first time in 10 years. Some traders believe a broad economic recovery is in the making that will stimulate more demand from car makers. On Tuesday, Ford Motor Co. posted a 33 percent sales gain in December as U.S. auto sales ended 2009 on an upswing, after a year when GM and Chrysler went bankrupt and China overtook the United States as the biggest car market.

Traders say the funds, which will issue securities backed by physical stocks of the precious metals, could attract significant inflows of platinum and palladium on their launch.

"For the next two or three weeks at least following the launch, this should be quite bullish for prices of both metals," said Tom Kendall, precious metals strategist at Mitsubishi Corp. "I have no doubt that platinum and palladium physically backed ETFs in the United States will be a success. The question is timing -- how quickly they see money going in -- and how much switching there is out of NYMEX positions into ETF holdings."

Platinum group metal prices traded nearly unchanged on Thursday, as traders had long anticipated regulatory clearance and the upcoming launch of the investment funds. U.S. April platinum PLJ0 futures were up 40 cents at $1,558.80 an ounce, while the March palladium contract was down 75 cents at $426.45 an ounce.

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