Platinum ETF holdings hit all-time high

September 25, 2013

JOHANNESBURG-S.A.  (Sept 25) Fears that an expected strike in South Africa’s platinum mines could cut supply of the metal at a time that demand could rise due to a potential recovery in the European diesel-car market sent metal holdings in the world's top platinum exchange-traded funds to an all-time high, Reuters data showed.

Physical platinum held by the world's five largest platinum-backed ETFs increased on Monday by almost 42,000 ounces, or 2 percent, to an all-time high at over 2 million ounces for the first time ever.

It was the biggest one-day increase in ounces since early May.

The jump was due to inflows into the U.S. ETFS Physical Platinum Shares, the world's second-largest platinum-backed ETFs which was launched in 2010.

The U.S. ETF ranks behind New Gold Platinum, or NewPlat, which in August had become the largest fund of its type in volume terms just four months after its launch on April 26.

ETFs are popular with retail and institutional investors as a way to get exposure to the platinum price without the complications of storing the metal.

Spot platinum prices are up about 11 percent since the end of June, when they had plunged to October 2009 lows as sliding gold prices prompted a broad institutional exodus of funds from precious metals.

On Tuesday, platinum was down 0.2 percent at $1,415 per ounce.

Worries about supply shortages because of mine violence earlier this year and the prospect of worsening strikes in South Africa have underpinned the price of platinum.

Members of a dominant South African mine labor union is planning to hold a strike on Friday at Anglo American Platinum, the world's top platinum producer, to protest job cuts.

"I wouldn't be short PGMs here with (South Africa’s mine union) vowing a complete shutdown of operations at Amplats," traders at TD precious metals trading desk said.

"These things are often contagious and will probably lead to systematic strikes disrupting supply."

Analysts estimate every four out of five ounces of the world's platinum reserve are found in South Africa.

Expectations that the European auto market should bottom soon and expanding global emission regulations also should boost platinum's demand.

While cheaper palladium is widely used in gasoline vehicles, platinum is more heavily used in diesel engines to filter out harmful gas emissions.

Investors are also looking at platinum due to frustrations on gold and silver's failure to sustain their rally last week after news that the Federal Reserve had decided to maintain economic stimulus, some market participants said.

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