Although 2013 was a pretty rough year for commodities, the past few weeks have been solid for the space. A weak jobs report pushed fears of more tapering to the backburner, while sluggish stock prices (and a flat dollar) have rekindled investors’ interest in many natural resources.
While most commodities have benefited from this trend, investors in the platinum market have to be especially pleased. After all, this commodity has risen in the past few weeks thanks to the aforementioned trends, as well as some other platinum-specific factors as well.
Thanks to this, platinum could be well-positioned for solid returns this year, especially if investors see a broadly better environment for commodities. Already the product has seen its price rise from about $1,340/oz. a month ago, to its current level approaching the $1,470 mark, putting the commodity within striking distance of its three month high.
Beyond some of the broad commodity factors, the labor unrest in South Africa also played a role in platinum’s rise as of late. A union representing the country’s top three platinum firms has called for a nationwide strike with 90,000 expected to participate. This has led to a drop in production, and continued labor issues in the world’s number one supplier of platinum could help to keep prices firm.
And just as supplies begin to dip, demand is looking to rise, largely thanks to surging automobile sales both here and in Europe. Autos are vital for platinum prices because catalytic converters are big users of platinum-group metals, so when car demand surges, platinum demand tends to go up as well (Read These 3 ETFs Could Soar on Strong Car Sales).
American car demand has been especially robust, with unit sales staying above an annual rate of 15 million since April’s data, but the real story has been in Europe. Analysts and industry executives now are looking for growth in European auto sales in 2014—after six years of decline—suggesting that the platinum-metal group could be in a very solid demand environment this year.
How to Play
For investors seeking to get in on the platinum market, there are a few ETFs that have direct exposure. Easily the most popular is the ETF Securities Physical Platinum Shares (NYSEARCA:PPLT) which has over $750 million in assets under management.
The fund invests in bars of platinum and holds them in a secure European facility, charging investors 60 basis points a year in fees for this service. The ETF is pretty much flat over the past three months, though it has added nearly 9% in the past one month time frame and could be poised for more gains in the months ahead.