Investors can finally rejoice in the ability to invest in the first real Platinum ETF that will hold the underlying commodity and remove tracking error, solvency risk and other detriments that accompany exchange traded notes (ETNs) that cover platinum currently. The existing ETNs tracking platinum relied on futures contracts, which often insert tracking error due to the contract roll.
Not only has platinum outperformed gold as a weak-dollar currency play, but platinum actually has real-world industrial utility whereas gold…well, that’s arguable in comparison. Platinum is a key catalytic converter element and with the developing world building cars faster than you can say “global recovery”, there’s going to be huge demand on platinum for decades to come. These countries will no longer stand for wretched pollution from newer vehicles. While drivers may be able to search for cheap insurance where they may, catalytic converters will always need platinum until some new technology comes along. That’s just one key use, aside from jewelry and other niche uses.
Take a look at how Platinum ETNs did in comparison to GLD in 2009:
GLD – 25%
PGM – 74%
PTM – 56%
Platinum ETF Summary:
Issuing Company: ETF Securities Ltd
Expense Ratio: 0.60%
Tax Treatment: From the prospectus, “Under current law, gains recognized by individuals from the sale of ‘collectibles,’ including physical platinum, held for more than one year are taxed at a maximum federal income tax rate of 28%, rather than the 15% rate applicable to most other long-term capital gains.”
By the looks of 2009′s doubling of inflows for commodity funds, this may be a trend with legs regardless of what happens to the US Dollar. By the way, a Palladium ETF has launched alongside it (PALL).