October 30, 2015 / 2:48 PM / 4 years ago

Platinum, palladium ETFs eye biggest monthly outflow on record

* Platinum ETF holdings tracked by Reuters drop 160,000 oz

* Reserves of palladium ETFs down 207,000 oz this month

* ETF holdings of both metals hit lowest since early 2014

By Jan Harvey

LONDON, Oct 30 (Reuters) - Platinum- and palladium-backed exchange-traded funds tracked by Reuters are facing their biggest monthly outflows since the data series began in 2010, after prices of the white metals slid to multi-year lows earlier this year.

Platinum-backed funds have seen outflows of just over 160,000 ounces so far in October, taking their holdings to their lowest since early 2014 at 2.232 million ounces.

The bulk of the selling was seen from the Johannesburg-listed NewPlat ETF operated by Absa Capital, which has seen its holdings fall 134,000 ounces this month.

Funds backed by palladium saw outflows of 206,831 ounces, also taking overall reserves to their lowest since early 2014.

The ETFs, which issue securities backed by physical stocks of platinum group metals, give investors exposure to the underlying asset price without having to take delivery of the metal.

The NewPlat fund proved particularly popular with South African investors, who could use it to gain exposure to platinum without eating into their 35 percent maximum allocation to foreign assets. It became the world’s biggest platinum ETF in August 2013, just four months after its launch.

NewPlat and other funds, including those operated by ETF Securities, Zurich Cantonalbank and GAM, have seen outflows this month following a slide in platinum prices to their lowest since early 2009, after the Volkswagen emissions scandal sparked fears of a slowdown in the diesel car market.

Platinum is widely used in catalytic converters, particularly in diesel engines.

The metal had already been suffering from soft Chinese jewellery demand, and a perception that supply was plentiful after an unprecedented five-month strike among South African platinum miners last year failed to lift prices.

“The negative publicity about diesel may have prompted some people to think the long-term story for platinum isn’t as good as they thought,” Macquarie analyst Matthew Turner said. “Some may have sold on those grounds.”

“For palladium, I think it’s more that people were taken by surprise by the move down earlier this year, and were unnerved by it. When it bounced back, they may have thought it was a good time to get out of the market.”

Palladium hit its lowest since September 2010 in August at $518 an ounce, and has since recovered to $672 an ounce. Platinum is at $986.50, well off this month’s low of $888 an ounce.

That recovery, particularly in South African rand terms in platinum’s case, has given some disillusioned investors a chance to cash out of the market, analysts said.

Rand-denominated platinum prices are up 8.5 percent this month, coming off their lowest in nearly three years, so this “could be interepretated as profit taking or indeed some residual stop-loss selling”, Mitsubishi analyst Jonathan Butler said. (Editing by William Hardy)

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