Leaving Gold for Platinum

Platinum, unlike gold, serves industrial purposes and is becoming more essential each day. Demand forecasts for the metal look strong given its use in the production of household items such as LCD televisions, as well as its use in the production of catalytic converters for automobiles.

Though the outlook for platinum looks optimistic, investing in the metal using ETF has not always been easy.

Prior to 2010, aside from a few illiquid exchange-traded notes, ETF investors looking for exposure to platinum had very few options available. This all changed in the first quarter when two new products were launched, allowing investors access not only to physical metal, but to the miners responsible for its production as well.

The ETF Securities Physical Platinum Shares(PPLT) made waves as one of the first official fund launches of 2010.

This instrument, like GLD, tracks the price of physical platinum. In the past month, its performance against GLD highlights investors' flight to risk. Since inception through March 30, PPLT is up nearly 4% while GLD treads in negative territory.

Investors who are more interested in tracking companies responsible for the production of platinum can turn to the First Trust ISE Global Platinum Index Fund(PLTM). This instrument, which made its entrance into the ETF arena in early March, is the first fund designed to track major domestic and international platinum metals group miners.

Top positions include Aquarius Platinum, Anglo Platinum, MMC Norilsk Nickel(NILSY) and Impala Platinum Holdings.

Be aware, however, that this fund is brand new to the industry and may take some time before it gathers enough steam to be stable.

In the end, although platinum has had an impressive run against gold recently, it would be unwise to transition entirely to the white metal from the yellow. On the contrary, it is important to hold onto defensive plays in order to prevent against unexpected market turmoil. However, in times of strength, exposure to an industry dependent precious metal like platinum will prove a nice addition for risk hungry investors.

-- Written by Don Dion in Williamstown, Mass.

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