Spreadsheet

Written by fe Bureaus | Updated: Jan 27 2010, 02:26am hrs
Dazzling platinum, palladium

Lesser known platinum and palladium have been hogging the limelight of late, pushing up gold and its so far dazzling run to the backburner. The metal duo, popularly known as PGM (platinum group metals) has traditionally attracted low investors interest because of poor volumes in exchanges and limited industrial usageit is largely used in pollution-control devices in automobiles.

But, the launch of two new Exchange Traded Funds (ETFs) on the NYSE Arca Stock Exchange in the first week of January has completely changed the complexion of the metals.

Called, ETFS Platinum Trust and ETFS Palladium Trust, the ETFs are backed by physical delivery of the metals. On January 15, the metal held in ETFs rose 2.6% to a record 6,79,938 tonnes, indicating that speculators are latching on to the metal on expectations that physical availability might go down in the open market.

Normally, an ETF backs its shares by buying a matching amount of metals to be stored in its custodians vault. By January 19, platinum for immediate delivery rose to $1,643.75 a troy ounce, its highest level since August 4 and palladium also traded at its multi-month highs of $462.25 an ounce.

In fact, Bank of America-Merrill Lynch (BoA-ML) raised its 2010 forecast for both the metals. The forecast for platinum was raised 35% to $1,750 an ounce, while for palladium by 30% to $500 an ounce. Platinum may average $2,000 an ounce and palladium $650 an ounce over 2011 respectively, BoA-ML said in its report.

Its not only this year that platinum and palladium are gaining ground. In 2009, while gold prices rose 24%, platinum jumped by 56% and palladium gained a whopping 117%. Analysts believe that the metals would keep on gaining this year due to improving car sales in China and elsewhere. But, the big factor would be the success of the twin ETFs that is expected to take a large amount of platinum and palladium from the markets.