Platinum is the third most heavily traded commodity in the world, after gold and silver. Platinum is difficult to buy and keep physically. However, investors can buy exchange-traded funds (ETFs) that specialize in the commodity. In addition to being a rare precious metal, there is great demand because it is used in car parts and electrical circuitry and even has some medical uses. Of course, platinum jewelry is also popular.
- Platinum is the third most heavily-traded commodity in the world, behind gold and silver
- Opportunities for platinum are highly dependent on market trends and the demand for the metal from the industrial and commercial sectors.
- Buying into platinum is also considered speculative, as precious metals can be a safe haven asset and a hedge against inflation.
- ETFs and ETNs are a great way to get access to platinum for ordinary investors.
The Platinum Market
Platinum has been experiencing a price decline in recent years and is expected to remain under pressure over the next few months, as of early 2019. Yet, several events could boost the metal's value. Platinum mine output has been lower from mine closings and decreased investment which has limited supply. If demand continues to be strong, the imbalance between supply in the market and demand could mean a rise in price for the precious metal. Analysts expect to keep a close watch on platinum as it competes for use with palladium in automobiles and electric cars. India and China are also reportedly increasing demand for platinum jewelry. Meanwhile, industrial sectors such as petroleum and glass are projecting increased usage.
However, most platinum ETFs were under pressure during 2018, after stalling through most of 2017. This sluggishness had persisted through early 2019, but by the mid-way through 2019, the price of the metal has picked up.
Despite the recent up-swing, two funds that we previously covered ended up being shut down in 2018: The iPath Bloomberg Platinum Subindex Total Return ETN (PGM) in April and the ETRACS CMCI Long Platinum Total Return ETN (PTM) in May. The iPath ETN from Bloomberg was shuttered as part of a phasing out of 50 iPath ETNs, all in April. In anticipation of this, iPath launched 15 "Series B" commodity ETNs in January that were similar to the 50 being shuttered, but less expensive for investors. We are including one of these "Series B" ETNs, the iPath Series B Bloomberg Platinum Subindex Total Return ETN (PGMB) among our listings.
In addition to PGMG, we have selected the top two platinum ETFs for investors to keep in mind, should trends in the industry improve. The three were picked based on their resilience amid the platinum price decline and the outlook for 2019-2020. Incremental demand changes could generate larger gains, specifically for investors watching market trends.
Note: Data on the funds is as of October 1, 2019.
1. ETFS Physical Platinum Shares (PPLT)
- Avg. volume: 88,015
- Net assets: $721 million
- Dividend yield: N/A
- YTD return: +15.56%
- Expense ratio: 0.60%
- Price: $82.50
PPLT is the strongest choice for gaining exposure to the price of physical platinum. Buying shares in this ETF gives the investor nearly the same return as actual platinum would, minus fund expenses. Note that the expense ratio is 0.60%.
Investors tend to use PPLT to avoid exposure to the futures market while gaining exposure to platinum. The fund buys and holds platinum bars and stores them in vaults. It does not pay a dividend because it only holds platinum bullion.
2. GraniteShares Platinum Trust (PLTM)
- Avg. volume: 4,488
- Net assets: $6 million
- Dividend yield: N/A
- YTD return: +16%
- Expense ratio: 0.50%
- Price: $8.70
GraniteShares Platinum Trust, which debuted on January 22, 2018, is only the second ETF to be backed by physical platinum, following the ETFS physical platinum shares. This low-cost fund has only been around for eight months and fills a void for those looking to invest in platinum ETFs, amid recent fund closings. The platinum underlying the fund will be stored in a secure vault in London. GraniteShares is newly introducing commodities ETFS, having also backed the GraniteShares Gold Trust (BAR) last year.
So far, since it began trading in late January 2018, GraniteShares Platinum Trust is up around 13% since inception.
3. iPath Series B Bloomberg Platinum Subindex Total Return ETN (PGM.B)
- Avg. volume: 163
- Net assets: $4.2 million
- Dividend yield: N/A
- YTD return: +16.25%
- Expense ratio: 0.45%
- Price: $41.50
PGM offers a different approach to the platinum futures market. It tracks an index of one platinum futures contract at a time, starting three months from maturity and held until just before expiration, according to a set schedule. As a result, the performance is different from that of spot prices. That makes the note cheaper than and different from a competitor such as PPLT, which more closely tracks spot prices. Because it's an ETN, taxes are lower. However, it is thinly traded and it can be difficult and costly to get out of the note.
The fund was launched January 17, 2018, and is currently up around 14% since that time.
The Bottom Line
PGMB does not create new shares, primarily because it is an ETN. This can lead to overvaluation of this entity. Creating new shares tends to reduce the price of an ETF, but since ETNs seldom issue new shares, there are no new issues to counter the rise in share prices. However, investors who are interested in platinum can buy existing shares of this ETN. PPLT and PLTM are actual ETFs with numerous shares available.
Overall, opportunities for platinum are highly dependent on market trends. Commercially and as a potential safe haven, it has the potential to increase in value through greater consumer demand. Industrial uses are also a highly sensitive factor, especially as manufacturing in the automotive industry advances and new developments occur with electric vehicles. Buying into platinum is speculative, therefore investors should allocate accordingly and expect to watch the market consistently to take advantage of potential gains.