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Platinum-Palladium ETFs
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About Platinum-Palladium ETFs |
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Platinum and Palladium ETFs Overview and forecast
Platinum and Palladium are chic, in investment terms. They're a bit more exotic than gold, and they've been doing well in the first half of 2009. These ETFs trade long, short, leveraged, and physical. The short ETFs, naturally, haven't been doing particularly well in this environment, but they're apparently hedging quite nicely.
Some of these ETFs are relative newcomers to the market, but at least one, E-TRACS CMCI Long Platinum ETN (NYSE: PTM) is very popular with traders. It's been around since May 2008, and since January has been trading in quite high volumes, way above it's 2008 volumes, in multiples. The Platinum and Palladium ETFs are the new kids in town, but traders have obviously developed a taste for the metals.
The Platinum and Palladium ETFs are true commodities, however, as trading materials. Like gold, if not as dramatically, their trading patterns are unlike other commodities, and subject to their own laws of motion. This is a somewhat less neurotic market than the gold market. The Platinum and Palladium ETFs are a range of diverse models, not really competing in terms of their strategies and methods.
Short term (6 months)
If you have a look at our current chart for PTM, http://www.etftips.com/PTM you'll notice a general upward movement, but some meaningful ups and downs in the process. If you have a look at the prices, volumes, and margins, you'll see that some people are doing rather well out of trading with this ETF. This can be good day trader territory, if you know the way the commodity behaves.
ETFs have changed investment paradigms, loosening up the old mutual structures, and adding some dynamics to markets like precious metals. Those dynamics have accelerated the markets, and some volatility can be a good thing. Precious metals are wealth creators, and the short term has real potentials for good margins.
Medium term (2 years)
If you hear the word trend, in relation to precious metals, it's a good guess, historically. Good analysis can predict trends, but only to a point. The precious metals are always subject to outside macro economic forces. A really hot stock market can pull money out of precious metals, as it did with gold during the 2000- 2005 bull market cycle. The price was flat, dull, and virtually immobile.
Platinum and Palladium ETFs are subject to these forces, and the conventional approach of using spreads is good practice. Platinum and Palladium are doing reasonably well both as precious and industrial metals, and they're slightly less instantly reactive, but they do move, and the downside has to be taken into account from any medium term perspective. There's no indication that these metals are particularly vulnerable in the same sense as gold. They can do better than gold in high volatility situations, as people position themselves on obvious lows, so a medium term based on low levels can be a very good option.
Long term (5 years)
Long positions in precious metals aren't necessarily for everyone. They can, however, be targeted, and using some good models, they can be good moves. PTM is a long position ETF, using longer ETNs to work on a three month framework. As you can see, this is a continual positioning process, and over time, this ETF can operate on a planned, coherent longer term basis.
There are, obviously, other options, in the physical ETFs. Physical ETFs work on returns based on the spot price, which is highly mobile, and allows for good returns on these prices. ETFS Physical Palladium ETF (LSE: PHPD) is a good indicator of how these ETFs operate. In the long term, this approach, which is essentially related to retail and wholesale industry prices for Palladium, can produce consistent returns over market averages. That's because those prices are naturally set above the big volume prices.
Qualifiers to projections
Platinum and Palladium ETFs are based on the nature of the market, which can be as fickle as any precious metal market. Investor interest and trader interest is definitely rising, but the Platinum and Palladium ETFs are an unproven investment vehicle over significant lengths of time. There is undeniable upside, and the spread approach is definitely the appropriate coverage methodology.
That said, the level of commitment needs to be considered on the basis of returns, and the current returns aren't spectacular, with the 12 month return showing some red which could concern investors. The negative returns are in general related to earlier 2008 market conditions during the worst of the crash. The following six months have returned the Platinum and Palladium ETFs to the right side of the returns, but this does illustrate how this market can move.
The world isn't going to be out of the woods for a while, and investors can afford to take the time to assess when and where to buy. Generally speaking, the peak prices, particularly spikes, are a good indication of when not to buy.
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Last Updated on: 2010-01-14 02:03:40 |
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