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TheStreet Open House

Platinum ETFs, ETNs May Shine on Metal's Demand

Stocks in this article: PPLTPGMPTM

NEW YORK ( TheStreet) -- Increases in investment demand, a recovery in automotive sales and further tightening of emission standards paint a positive picture for the demand of platinum which is expected to support prices of the metal.

Industrial demand for platinum is expected to increase because of its versatility as economies around the world continue to grow. Platinum plays a significant role in electronics in that it is used in the production of hard disk drive coatings and fiber optic cables. As demand for personal computers remains elevated around the world and is expected to further increase as personal incomes rises in developing countries, demand for platinum will likely see positive support.

Platinum demand is expected to be further supported from a recovery in automotive sales as well as the passage of stricter emissions and regulations on automobiles in the United States, Europe and Asia. In Europe, the region is moving to fully implementing regulation on emissions from diesel engines; in Asia, sales of automobiles are expected to remain healthy. A combination of these trends is likely to offer positive demand support for platinum due to its use in vehicle exhaust catalysts which control a vehicle's emissions.

A third force that is likely to give positive support to the demand of platinum is increased demand for jewelry. The demand for platinum jewelry has steadily been increasing around the world but most recently is witnessing spiked demand in China. As for the near future, this demand in China is expected to be sustainable, if not increase, as wages and personal disposable income is expected to rise.

These forces that are likely to bolster platinum demand are expected to cause a supply and demand imbalance which is expected to push prices of the metal higher. From a supply perspective, supplies of newly mined platinum are expected to remain insufficient to satisfy demand and the supplies of recycled platinum are slowly dwindling away.

An investor can gain access to the platinum markets through the following:

  • ETFS Physical Platinum Shares (PPLT)
  • iPath DJ-UBS Platinum Sub-Idx ETN (PGM)
  • UBS E-TRACS Long Platinum TR ETN (PTM)
  • First Trust ISE Global Platinum Index (PLTM).

Although an opportunity seems to exist in the metal, it is equally important to consider the inherent risks involved with investing in platinum. To help protect against these risks, the use of an exit strategy which identifies specific price points at which an upward trend could come to an end is of important. Such a strategy can be found at SmartStops.net.

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