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Safe haven

23 September 2020

Investors seeking the reassurance of hard assets in the wake of the COVID-19 pandemic are turning to platinum exchange traded funds

Platinum exchanged traded funds (ETFs) saw significant inflows during the second quarter of 2020, with holdings growing by 122 koz. This compares to outflows of 213 koz during the prior quarter, most of which occurred in March when some investors sold platinum positions in order to raise cash amid a global equity collapse. 

Platinum ETF holdings closed the second quarter at 3.3 moz; 93 per cent of their previous all-time high on 2 March 2020 of 3.5 moz. Holdings subsequently set new all-time highs in August and September 2020, reflecting a resurgent interest in this undervalued precious metal that has widespread industrial uses.

A number of factors have influenced investor interest in platinum ETFs. The platinum price has proved to be an attractive entry point for many investors - interestingly, since the platinum and gold price lows of 19 March 2020, at US$599/oz and US$1,472/oz respectively, platinum has significantly outperformed gold, rising 46 per cent versus gold’s rise of 29 per cent. 

Further, investors are seeking access to hard assets in the face of the economic uncertainty brought about by the COVID-19 epidemic. At a time of very low interest rates, and in light of the stimulus programmes many authorities have undertaken to support national economies, platinum offers similar safe haven characteristics to gold, providing a hedge against the risk of inflation and currency devaluation.

Longer-term value

The growth in platinum ETF holdings has been especially strong in North America and Europe, reflecting a growing recognition of the platinum investment case and a belief that platinum also offers longer-term value. Investors are seeing upside in platinum’s demand prospects as substitution of platinum for palladium in autocatalysts gathers pace. In addition, platinum’s green metal credentials, as the metal that can unlock the hydrogen economy, are beginning to register. 

Following the strong performance of platinum ETFs last quarter and based on inflows since the end of June, net sales of global platinum ETFs experienced in the first quarter of the year have already been offset by these inflows. However, the ETF demand forecast for 2020 prepared by Metals Focus for the WPIC anticipates current trends to fall off in the final quarter of the year, resulting in net ETF demand of 160 koz for the full year. 

 

N.B. ETPs include physically-backed ETFs

Contacts:

Brendan Clifford, Investor Development, [email protected]
Trevor Raymond, Research, [email protected]
David Wilson, Research, [email protected]
Vicki Barker, Investor Communications, [email protected]

WPIC does not provide investment advice.
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