Gold investors have long-believed the mainstream is close at hand.
One of the major arguments from gold bulls over the last ten years has been that bullion prices will rise as gold becomes recognized amongst a wider range of investors as a legitimate option for protecting wealth.
This “mainstreaming” has been sped lately by a number of investment instruments allowing buyers to own physical gold without the hassle of storing the metal. Most notably, exchange-traded funds (ETFs).
ETFs have become an important force in the gold market. And now it appears they may be doing same for platinum.
2010 saw the launch of the first ETFs holding physical platinum, in both the U.S. and Japan. Giving investors an easy way to own “the other precious metal”.
And investors have lately been giving these funds a lot of love. While investment flows into gold and silver ETFs have turned negative over the last few weeks, money continues to flow into platinum funds.
The result being that open interest in platinum on global exchanges is running at record highs. On Monday, open interest in NYMEX platinum jumped nearly 5% to over 38,500 contracts. Open interest has been rising steadily since the beginning of March.
Adding up ETF holdings of platinum (running near 935,000 ounces), plus open interest on the NYMEX and TOCOM exchanges, platinum long positions are at an all-time record.
This buying has been good for platinum prices. The metal has risen 7% since late February, from US$1,500 per ounce to over $1,600.
But this is a situation that needs careful monitoring. ETFs and other mainstream investments can be a double-edged sword. It’s great when investors are piling in and driving up prices. But the price can go the other way equally quickly if the winds of sentiment change and holders start selling.
One thing is certain. More ETF investing will mean more volatility. This is already showing up in the palladium market, which also saw new ETFs introduced recently.
Palladium open interest on the NYMEX spiked in late February. Then plunged 10% in early March. But over the last two weeks, buying has once again surged.
Getting these metals in front of a wider audience has potential to create a lot of buying. Just beware of the trade going the other way.
Here’s to the wide world of metals,
Dave Forest
dforest@piercepoints.com
Copyright 2009 Resource Publishers Inc.
Note:
The information provided in this newsletter is based on the independent research of Dave Forest and Notela Resource Advisors Ltd. and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade any securities or commodities named herein. Information contained in this newsletter is obtained from sources believed to be reliable, but is in no way assured. All materials and related graphics provided in this newsletter and any other materials which are referenced herein are provided “as is” without warranty of any kind, either express or implied. No assurance of any kind is implied or possible where projections of future conditions are attempted. Readers using the information contained herein are solely responsible for verifying the accuracy thereof and for their own actions and investment decisions. Neither Dave Forest nor Notela Resource Advisors Ltd., make any representations about the suitability of the information delivered in this newsletter or any other materials that are referenced herein for any purpose whatsoever. The information contained in this newsletter does not constitute investment advice and neither Dave Forest nor Notela Resource Advisors Ltd. are registered with any securities regulatory authority to provide investment advice. Readers are cautioned to consult with a qualified registered securities adviser prior to making any investment decisions. The information contained in this newsletter has not been reviewed or authorized by any of the companies mentioned herein.
The hardest work
Is to stand up perfectly straight,
As the universe falls down around you.
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