Platinum ETF launch fails to ignite market

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� ETF backer 'astonished' by producer ire
� Pt swap talk returns to market
� A second platinum ETF drives prices
� Platinum producers spurn ETF plan

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Platinum ETF launch fails to ignite market
Allan Seccombe
Posted: Wed, 25 Apr 2007

[miningmx.com] -- THE much-anticipated launch of a platinum-backed exchange-traded commodity (ETC) hardly set the market alight on Tuesday, with a mere 82 ounces going into the financial instrument, but the backers say it is still early days.

UK-based ETF Securities launched five ETC products on the London Stock Exchange on Tuesday, including platinum, palladium, silver, gold and a precious metals basket.

�You tend to find these products have a slow start,� said Hector McNeil head of sales at ETF Securities.

a slow start

An hour before the close of trade in London, investors had bought ETCs representing 81.5 oz of platinum, 200.5 oz of palladium, 80 oz of gold and silver was untraded.

The platinum price pulled back to a bid price of $1,300/oz after a morning fix of $1,325.

A second platinum-backed exchange traded fund will be launched on the Swiss Stock Exchange on 10 May. The product is expected to take 70,000 oz of platinum off the physical market in a year.

Platinum prices have touched five-month highs on news of the exchange traded products as investors anticipated increased offtake of physical metal from an already tight market.

Platinum producers have opposed the exchange-traded products, saying increased prices will lead to further declines in platinum offtake in the jewellery sector, which is sensitive to high prices. Demand for platinum in jewellery has fallen so far this decade in a volatile price environment.

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The basket ETC made up of 42% gold, 26% silver, 20% platinum and 12% palladium fared better, with $3m worth of securities bought on the first day of trading.

�It�s traded the most today,� said Nik Bienkowski, head of listings and research at ETF Securities.

�All the precious metals are pretty highly correlated to each other at around a 0.7/0.8 correlation. The basket gives you that close correlation to all the metals but a slightly reduced volatility because it�s slightly diversified,� he said.

ETF had expected a slow start to the uptake of the products given their experience in a range of other exchange-traded instruments they�ve launched in the past.

�We certainly expected to take a few weeks to really get going. Even if you have very interested investors, they have to get it through investment committees and new product sign off,� McNeil said.

Investors liked to see these new instruments traded and monitor the spread between the bid and ask prices, which on Tuesday were very tight in the platinum and palladium securities, he said.

The physical metal backing these instruments is held in Custodian HSBC Bank in the United States. The metal is secured by financial institutions participating in the ETC market.

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