Investors are swarming to exchange traded funds that invest in precious metals such as platinum and palladium. The precious metal ETF’s have become popular because of the perception they carry as being a store of value and their relevance to cyclical global industry.
The ETF’s purchase the metals on the open market and then proceed to store their stock waiting for the price to appreciate.
Analysts estimate that approximately 13 per cent of global platinum reserves are locked up in vaults, and that hoarding coupled with a shortage of supply has pushed the price of the metal to nearly 18 month highs.
London-based ETF Securities on Friday said trading volumes of platinum and palladium ETFs surged in the first week of 2010, up nearly 200 per cent to $1.3 billion.
ETF Securities has launched products on both the Australian and New York Stock exchanges, and says investors in both markets have fully embraced their funds.
ETF Securities Nigel Phelan says that precious metal ETF’s allow investors to carry direct exposure to a commodity without having to undertake the company risk associated with an equity.
According to ETF Securities, products have been launched on the Tokyo stock exchanges but its popularity in Japan has not matched that seen in Australia and America.
Mr. Phelan says he believes that Australians are receptive to new investment products and are very savvy when it comes to making investments in the natural resource sector.
“Asia is the next frontier, we have no doubt that Japanese investors, in particular, will want these products at some point.” Mr Phelan said.
Mr. Phelan has an extremely sanguine view of the outlook for precious metal and says that price rises will be driven by industrial demand for their use in catalytic converters that are used to power electric cars.
Supply from miners in Africa had been crimped by a lack of funding, which did not look set to abate any time soon, Mr. Phelan said.
“The stars are aligning in terms of an investment case for platinum and palladium ETFs,” he said.