Platinum ETFS for 2017

Platinum is difficult to buy and keep physically. However, investors can buy exchange-traded funds (ETFs ) that specialize in platinum. In addition to being a rare precious metal, there is great demand for platinum because it is used in car parts and electrical circuitry and even has some medical uses. Of course, platinum jewelry is also popular.

Platinum has been experiencing a price decline in recent years, but several events may boost platinum in the near future. Many platinum mines have closed and this has limited supply. If demand continues to be strong, the imbalance between supply and demand could mean a rise in price for the precious metal. Also, Asian financial institutions have decided to increase their buying of platinum to mitigate volatility in the equity markets. (See also: These Charts Suggest Now Is the Time to Buy Platinum.)

We have selected the top three platinum ETFs based on year-to-date returns as of December 31, 2016. We also looked for a variety of approaches for investing in platinum to give investors broader choices.

ETFs Physical Platinum (PPLT)

PPLT is the strongest choice for gaining exposure to the price of physical platinum. Buying shares in this ETF gives the investor nearly the same return as actual platinum would, minus fund expenses. Note that the expense ratio is 0.60%.

Investors tend to use PPLT to avoid exposure to the futures market while gaining exposure to platinum. The fund buys and holds platinum bars and stores them in vaults.

PPLT is the biggest platinum fund by trading volume. It does not pay a dividend because it only holds platinum bullion.

• Avg. Volume: 55,563

• Net Assets: $481.02 million

• Yield: 0.00%

• YTD Return: 1.88%

• Expense Ratio: 0.60%

• Inception Date: January 1, 2010

• Since Inception: -7.51%

UBS E-Tracs CMCI Long Platinum Total Return ETN (PTM)

PTM is actually an exchange-traded note (ETN) that gives investors exposure to the platinum futures markets. It attempts to mimic the UBS Bloomberg CMCI Platinum Total Return Index. The futures contracts have a maturity of three months. PTM holds a basket of futures contracts with varying expiration months to mitigate risk.

PTM is not very liquid because it trades around 10,000 shares per day. Note that an ETN is a debt security, so anyone interested in this fund should examine the creditworthiness of the entity issuing the note.

• Avg. Volume: 10,569

• Net Assets: $19.16 million

• Yield: 0.00%

• YTD Return: 1.37%

• Expense Ratio: 0.65%

• Inception Date: May 8, 2008

• Since Inception: -10.07%

iPath Bloomberg Platinum Subindex Total Return (PGM)

PGM offers a different approach to the platinum futures market. It tracks the Bloomberg Platinum Sub-index Total Return. This index holds a futures contract on platinum in the nearest contract month. It may also hold U.S. Treasury bills.

The low average volume indicates that PGM is not very liquid.

• Avg. Volume: 598

• Net Assets: $6.89 million

• Yield: 0.00%

• YTD Return: 0.85%

• Expense Ratio: 0.75%

• Inception Date: June 24, 2008

• Since Inception: -10.43%

Bottom Line

PGM and PTM do not create new shares, primarily because they are ETNs. This can lead to overvaluation of these two entities. Creating new shares tends to reduce the price of an ETF, but since ETNs seldom issue new shares, there are no new issues to counter the rise in share prices. However, investors who are interested in platinum can buy existing shares of these two ETNs.

PPLT is an actual ETF with numerous shares available. Clearly, the opportunities here are for those who think the limited supply in the face of steady or increasing demand will raise the price of this commodity. (See also: A Beginner's Guide To Precious Metals.)

Buying into platinum would most certainly be considered speculative at this point, so this ETF and the ETNs might not be suitable for the major portion of investment assets an investor may have. A careful allocation strategy, however, could make an investment in platinum a reasonable risk.

Platinum market deficit set to shrink in 2017

Platinum market deficit set to shrink in 2017 - WPIC

* Platinum market expected to see 100koz shortfall next year * Diesel share of European car market tipped to fall * Bar, coin investment seen weakening in 2017 By Jan Harvey LONDON, Nov 22 The platinum market deficit will shrink to its narrowest since 2011 next year, the World Platinum Investment Council said on Tuesday, as a drop in investment and diesel's waning share of the European car market pressure demand. The WPIC also cut its expected platinum market shortfall for this year to 170,000 ounces from the 520,000 ounces predicted in September, citing a larger than expected drop in Chinese platinum jewellery demand, and higher recycling. That deficit will likely shrink to 100,000 ounces in 2017, it said, cutting above-ground stocks of the metal to 2.045 million ounces by the end of next year, the WPIC said. "It's all good and well to say that metal is available from above-ground stocks, but as soon as the vaulted holdings aren't for sale, any deficit makes for concern, especially from industrial users," the WPIC's director of research Trevor Raymond said. Autocatalyst demand is expected to decline 1 percent next year, the WPIC said, as diesel's overall share of the autocatalyst market shrinks. Demand for platinum for use in catalytic converters was flat this year, it said, in the face of concerns that last year's Volkswagen emissions scandal would dent demand for diesel cars, which use a higher loading of platinum in their autocatalysts. "At the moment, the 2016 percentage of diesels on European roads is 50 percent. Our forecast for next year includes a 48.5 percent diesel share, so that's a fairly aggressive fall," Raymond said. There has also been a move to other forms of emissions control technology, he said. Investment in platinum, which is expected to have risen 15 percent this year on the back of strong coin and bar demand, particularly in Japan, is forecast to fall by more than a quarter next year, the WPIC said. It expects bar and coin investment to lighten, and demand for platinum-backed exchange-traded funds, which tailed off recently after a strong start to the year, to be little changed. Overall platinum demand is tipped to fall 3 percent this year to 8.04 million ounces, the WPIC said. Jewellery demand is expected to slip by 10 percent, or 300,000 ounces, as buying in number one consumer China drops for a second year. On the supply side of the market, refined production by mining companies is predicted to have fallen 3 percent this year. The WPIC revised up its forecast for recycled platinum supply this year to 1.86 million ounces from 1.745 million in September, due chiefly to rising jewellery recycling in China. PLATINUM SUPPLY/DEMAND ('000 OZ)* 2015 2016 2017 (f) (f) Refined production 6,150 5,970 6,070 Change in producer inventory 45 40 -70 Total mine output 6,195 6,010 6,000 Recycling 1,710 1,860 1,745 TOTAL SUPPLY 7,905 7,870 7,745 Automotive demand 3,395 3,390 3,360 Jewellery 2,880 2,580 2,625 Industrial 1,685 1,720 1,610 Investment 305 350 250 TOTAL DEMAND 8,265 8,040 7,845 Balance -360 -170 -100 Above-ground stocks 2,315 2,145 2,045 * Source: World Platinum Investment Council, Platinum Quarterly Q3 2016