The Conversation (0)
Platinum Investing News speaks with William Rhind, Strategic Director of Business Development from ETF Securities. Platinum may have even more success on market in the future, though this will be contingent on global economic recovery, and the auto industry.
By Damon van der Linde – Exclusive to Platinum Investing News
“What we are seeing right now is that investors who are the most bullish on platinum are those that are the most positive on an economic recovery,” said William Rhind, Strategic Director of Business Development for ETF Securities US in an exclusive interview with Platinum Investing News.
Aside from its use in jewelry, platinum is primarily used in the automotive and industrial sector, which is why demand dropped during the financial crisis of the late 2000s. The most prolific application of platinum is in automobiles as a catalytic converter, which allows the complete combustion of low concentrations of unburned hydrocarbon from the exhaust into carbon dioxide and water vapor.
“In the financial crisis, platinum suffered because the primary demand was in the automotive industry, which was one of the worst hit sectors,” said Rhind. “The automotive industry is just starting to rebound and if you are of the opinion that things are going to get better in the next few years, then you must know that platinum is a key ingredient in that growth.”
Global demand for platinum in autocatalysts is projected to gain 37 percent from 2009 by the end of the year, according to the 2010 Platinum Interim Review by Johnson Matthey. The report says growth is expected to be particularly strong in China’s car industry which is expected to push demand for platinum by more than a third in 2010 from a year earlier. China surpassed the United States as the world’s biggest auto market last year, making it a key driver of platinum demand.
The report also forecasts that in spite of the popularity of platinum exchange traded funds (ETFs), physical investment demand for platinum is forecast to fall by 34 percent to 435,000 ounces in 2010. The rising price is also expected to reduce demand for platinum coins and bars, and encourage redemption of ETF positions. The six-month outlook for the platinum market in the Interim Review is for the metal to trade in a range between 1550/oz and 1900 /oz, averaging 1750/oz.
An alternative to investing exclusively in platinum ETFs is the ETF Securities Precious Metals Basket Trust (NYSE: GLTR) which contains a 50 percent investment in ETFS Gold Trust (NYSE: SGOL), and the remaining 50 percent in the ETFS Silver Trust (NYSE: SIVR), ETFS Physical Platinum Shares (NYSE: PPLT) and ETFS Physical Palladium Shares (NYSE: PALL). GLTR was launched in October 2010 and is the first U.S.-based, physically-backed precious metal basket ETP.
“We’ve always talked about precious metals in the singular in this country. People invest in gold and silver and palladium, but nobody so far has been able to offer the sector for precious metals together in physically-backed form,” said Rhind.
Rhind explained that having four metals in a basket is less volatile than investing in physical platinum itself. “Of the four precious metals, platinum, silver and palladium are more volatile than gold, though currently, we are in an environment where the other metal prices are outperforming gold,” said Rhind. “I think there is an appeal for GLTR to the investor who’s not a precious metals specialist and who doesn’t want to go into detail to ascertain what metal outperforms the other.”
Rhind says he is pleased with the market response to GLTR. Isivrn early November, ETF Securities USA announced that Precious Metals Basket Trust exceeded $2.5 billion U.S..
“I think the success of GLTR so far is attributed to precious metals as a sector,” said Rhind. “As a single ticket solution, it makes sense for a lot of investors in the country looking to get cheap and easy access to precious metals.”