Platinum ETFs Take Off


"ETF investors saw outsized trading in the physically backed commodity of platinum with the ETF Securities Physical Platinum Shares Fund."

American equity markets finally had a solid day as all three of the major indexes rose in Thursday trading. The Dow and the S&P 500 both moved higher by about 0.7% while the Nasdaq was the big winner—buoyed by Cisco’s solid report—as the benchmark added about 1% on the day.

In terms of sectors, it was a pretty good day all around although gains were obviously more robust in the technology market. Basic materials and financials were also solid performers, while health care and services were more mixed-to-negative, led by a 3.1% loss for Wal-Mart.

These broad market gains were likely spurred by more weakness in the U.S. dollar, as the currency lost at least half a percent against the yen and the euro. Meanwhile, rates continued to rise for U.S. Treasury bonds as now the benchmark rate is holding steady above 1.8% a year (read Malaysia ETF: The Perfect Emerging Market Fund?).

Headline commodities were positive, as gold and oil both rose on the session, while copper and wheat also jumped higher as well. Investors did see some weakness in natural gas, while trading continued to be weak in the cocoa and coffee markets.

For ETF trading, volume was again light although it continued to tick higher when compared to periods from earlier in the month. Commodity trading was especially robust, while a few sector and bond products also had decent days from a volume perspective.

In particular, ETF investors saw outsized trading in the physically-backed commodity of Platinum with the ETF Securities Physical Platinum Shares Fund (PPLT). Usually, the product sees about 39,000 shares change hands but today the product experienced volume well over 350,000 shares (see Top Commodity ETFs in this Uncertain Market).

A large reason for today’s spike was undoubtedly the solid performance out of the metal in the session’s trading as PPLT added just over 3.5%. This move helped the fund move decisively off of its 52 week lows although the product is still depressed from its 2012 highs.

This increase was clearly due to the South African mining situation as many striking platinum miners in the country are taking a hard line stance on their issues. Clashes have become violent, and any geopolitical worries in the country that has over 80% of the world’s platinum are likely to boost prices in the short term.

Another fund that saw a great deal of trading was the PIMCO 25+Year Zero Coupon U.S. Treasury Index ETF (ZROZ). This product usually does about 42,000 shares in volume in a normal day but saw interest spike to 283,000 shares in Thursday’s session (read Is The Bear Market For Bond ETFs Finally Here?).

The outsized interest today was probably due to more bearish activity in the fund as the product declined by about 2.5% on the session. This loss continued the horrendous August for ZROZ, as the fund is now down 10.7% in the time frame. Clearly, some investors must be getting concerned over the long-dated market, as this segment was one of the best performers to start the year but is now being crushed in the summer months.

Eric Dutram
Zacks Investment Research

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