A Guide to Platinum ETF Investing
Source: Seeking Alpha, Michael Johnston (10/2/09)
". . .aboveground supply of platinum could be expected to last about a year. . ."
Platinum is used in a variety of consumer and industrial products, but the majority is used in catalytic converters for automobiles. Catalytic converters allow the complete combustion of low concentrations of unburned hydrocarbon from the exhaust into carbon dioxide and water vapor, and as such are critical to controlling emissions.
Platinum is extremely rare, with estimated new mine production of only about 210 tons per year. This scarcity can make platinum significantly more expensive than both silver and gold.
Many analysts believe the scarcity of platinum makes it a preferred means of investing in precious metals. Mining and extraction of platinum is an extremely labor-intensive and complex process, yielding about six million ounces of platinum every year. This amount represents less than 5% of annual gold production.
According to Northwest Territorial Mint, all of the platinum ever mined would fill a room measuring less than 25 feet on each side. Moreover, aboveground supply of platinum could be expected to last about a year, compared to about 25 years for gold.
The two most efficient options for investors to gain exposure to platinum prices are the iPath Dow Jones-UBS Platinum Subindex Total Return ETN (PGM) and UBS E-TRACS CMCI Long Platinum Total Return ETN (PTM). Both are designed to track the performance of a basket of platinum futures contracts.