Platinum ETF & ETN Products

With the tremendous growth and success of other C ommodity ETF products the past several years it was inevitable that they would branch out from the Mega Funds (Gold, Silver, Oil & Gas) into some of the niche commodities. Platinum is definitely one of the more popular niche metals but remains a relatively small market with annual production of only about 7,000,000 ounces.

PPLT — ETFS Physical Platinum ETF is similar to their predecessors the Physical Gold ETF and Physical Silver ETF which are also from ETF Securities LTD. Since this fund is backed by actual physical platinum it raised concern among platinum users that it would cause a price spike since it’s a relatively small market. The goal of the fund is to deliver the performance of cash platinum price fluctuations minus fees and expenses.

Each PPLT share is backed by approximately 1/10th ounce of physical platinum which is stored in London and Zurich on behalf of the trust. According to the prospectus each platinum bar is numbered and is reported daily on the ETFS web site. Average daily trading volume is around 75,000 shares making it the most liquid Platinum ETF or ETN. This is much less liquid than other precious metal etfs but still adequate liquidity for investing or trading.

The annual expense ratio is .60% (60 Basis Points)

PPLT Price Performance Since Inception 1/8/2010

As you can see by comparing PPLT to Cash Platinum below it has tracked the price of cash very accurately.

Here is a comparison of PPLT to GLD since inception. As you can see Platinum has underperformed gold by nearly 15% in the past 11 months due to the fact that industrial demand for platinum has been weak.

Platinum ETN Products

There are also a few Platinum ETNs that track the price movement of Platinum related indices. These ETNs have a bit more credit risk but if you don’t mind the fact that it’s not backed by actual Platinum they may be a consideration as well.

PTM — UBS E-TRACS Long Platinum Total Return ETN seeks to track (net of expenses) the UBS Bloomberg CMCI Platinum Total Return Index. As you can see from the chart below PTM has been tracking the performance of PPLT quite closely since it (PPLT) began trading.

However, with an average daily trading volume of only 29,691 shares /day (as of 12/21/2010) which is less than 40% of PPLT and an expense ratio of .65% (65 Basis Points) I’m not sure there is any incentive to give up the backing of the actual physical platinum. There are often trade offs between two different ETF / ETN products but in this case there appears to be no advantage to buying PTM. This includes price performance which you can judge for yourself in the chart below.