January 7, 2010 / 5:32 PM / 9 years ago

UPDATE 3-U.S. platinum, palladium ETFs set to trade Friday

 * First U.S. platinum, palladium ETFs to launch Friday
 * PGMs outperforming gold since start of December
 * New U.S. PGM funds expected to draw physical metal  (Recasts, adds details throughout)
 By Frank Tang
 NEW YORK, Jan 7 (Reuters) - The first U.S. platinum and palladium exchange-traded funds will launch on Friday, giving U.S. investors easier access to the industrial metals, which have already rallied on hopes for more fund-based stockpiling.
 Analysts expected the new products to give platinum group metals a shot in the arm and fill some of the void left by lower demand from the beleaguered auto sector.
 NYSE Euronext said on Thursday that ETFS Physical Platinum Shares PPLT and ETFS Physical Palladium Shares PALL will begin trading on the NYSE Arca platform. The funds are wholly owned by London-based ETF Securities Ltd.
 “Everybody tends to rush into gold when they think of precious metals. Platinum group metals have the added benefit of a high level of industrial input,” said Bill O’Neill, partner at New Jersey-based LOGIC Advisors.
 Platinum group metals have outperformed gold since the beginning of December, when the launch of the ETFs was widely anticipated among traders.
 During that period, platinum was 7 percent higher, and palladium was up 17 percent, compared with a 4 percent decline in gold.
 Platinum is used mainly in autocatalysts to clean exhaust fumes from vehicles. That accounts for more than 60 percent of total platinum demand.
 “With the growth of car usage in India and China, demand for platinum group metals should be quite buoyant. It’s going to be a metal that attracts a lot more attention in the future,” O’Neill said.
 Investment in platinum has been rising even as demand from the auto industry fell for the first time in 10 years. Some traders believe a broad economic recovery is in the making that will stimulate more demand from car makers.
 On Tuesday, Ford Motor Co (F.N) posted a 33 percent sales gain in December as U.S. auto sales ended 2009 on an upswing, after a year when GM and Chrysler went bankrupt and China overtook the United States as the biggest car market.
 Traders say the funds, which will issue securities backed by physical stocks of the precious metals, could attract significant inflows of platinum and palladium on their launch.
 PGM exchange-traded products currently listed in London and Zurich have attracted a significant amount of the metals. ETF Securities’ platinum and palladium funds currently hold more than a million ounces on a combined basis, and the Zurich Cantonal bank also holds nearly 0.8 million ounces.
 For a factbox of precious metals ETF holdings, click here [ID:nLDE6031MV]
 “For the next two or three weeks at least following the launch, this should be quite bullish for prices of both metals,” said Tom Kendall, precious metals strategist at Mitsubishi Corp.
 “I have no doubt that platinum and palladium physically backed ETFs in the United States will be a success. The question is timing — how quickly they see money going in — and how much switching there is out of NYMEX positions into ETF holdings.”
 Platinum group metal traded nearly unchanged on Thursday, as the news already had been factored into prices.
 U.S. April platinum PLJ0 futures ended up $1 at $1,559.40 an ounce, while the March palladium contract PAH0 closed down $2.65 at $424.55 an ounce.  (Additional reporting by Jan Harvey in London; Editing by Walter Bagley)       

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