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GPF Physical Platinum ETC

GPF Physical Platinum ETC

Lowest priced physically-backed Platinum ETC on the market today.

  • Total Expense Ratio of 0.2%

  • Physically backed with allocated platinum in vaults

  • Ownership tracked with Distributed Ledger Technology

Investment Case for Platinum

Applications

Data from Johnson Matthey suggests that in 2019, 33.9% of platinum demand was realised in its use as an autocatalyst, predominantly in diesel exhaust systems. Indeed, autocatalysts have been the single largest use for platinum for many years, driven by increasingly stringent emissions legislation, requiring greater platinum loadings. Platinum’s catalytic properties are also largely responsible for its use in both the chemical (8.2%) and petrochemical (3.3%) industries. Further industrial applications for platinum were seen in the glass (4.8%), medical & biomedical (2.7%) and electronics (2.6%) sectors. 

Platinum remains popular as a jewellery item and such use accounted for 24.2% of demand in 2019. The investment market for physical platinum also appears to be developing. In 2019 investment vehicles such as bars, coins and physically-backed exchange-traded funds (ETFs) and similar accounted for 13.3% of total demand. Going forward, platinum’s efficacy in fuel cells has the potential for a future growth market. 

The Investment that Glitters

Like other precious metals, platinum has a number of attractive qualities as an investment including:

  • Provides diversification

  • Relatively cheap vs. Gold

  • Relatively cheap vs. Palladium

  • Is a play on the hydrogen economy

Like most precious metals, platinum has historically exhibited low correlation to the performance of equity and debt markets, and gold and silver. Over the last 20 years, the correlation of spot platinum to equity and debt markets is only 0.4 and 0.3 respectively 1, whilst the correlation to gold and silver is a little higher at 0.6 respectively. With such a low correlation to equity and debt markets, even small allocations to platinum provides meaningful improvements in the efficiency and risk characteristics of a 60/40 portfolio.

Many investors don’t like metals like platinum as an investment, as it pays no income stream whilst incurring storage costs. However, today we live in a world where cash also pays little to no interest and government bond yields are low-to-negatively-yielding, which makes the argument against holding platinum a lot less relevant. It is also worth noting that according to the IMF, “The Long Economic Hangover of Pandemics” (Oscar Jorda, 2020 2), pandemics typically depress real interest rates over multiple decades which again implies a favourable environment for investing in platinum.

Hydrogen Economy

Whilst the hydrogen economy is still quite nascent, it is worth understanding the implications for platinum as governments accelerate towards a carbon neutral world. The EU, for instance, has set out a strategic plan to increase hydrogen from 2% to approximately 14% of its energy mix by 2050 3. Platinum’s unique hydrogen-absorbing properties make it indispensable to a future hydrogen economy, including green hydrogen production and in fuel cells. Platinum therefore could be an interesting play on this exciting new field.

Price History

Platinum’s price has increased ~50% over the last 20 years which has underperformed the S&P 500’s approx. 2.5x gain during the same period. In fact, comparing the price of platinum to other precious metals like gold and palladium we find that over the last 20 years, the price ratio of gold to platinum has increased from 0.4 to over 2.0 whilst the ratio of platinum to palladium is down to 0.4 from a peak of 5.4. Platinum therefore looks very cheap relative to Gold and Palladium. Given their chemical and physical similarities and with platinum being remarkably cheap in comparison, an allocation to this metal can be a great hedge against the risk of palladium being substituted in the auto industry as well as others. 

Properties

Platinum is a chemical element with the symbol Pt and the atomic number 78. It is a rare, dense and lustrous, silvery-white metal and it is, together with palladium, iridium, osmium, rhodium, ruthenium, considered one of the platinum group metals (PGMs). PGMs are all highly resistant to wear and tarnish and are generally resistant to chemical attack. They are thus considered ‘noble’ metals. They also possess excellent high-temperature characteristics, high mechanical strength, good ductility and have stable electrical properties. PGMs additionally possess catalytic properties (i.e. they can accelerate certain chemical reactions). 

Occurrence

Platinum is 3x rarer than gold and is considered a ‘precious’ metal, However, it significantly more difficult to extract and refine.  Although pure lodes have been found, this is unusual. Typically, platinum is found alongside other PGMs, within nickel and copper ores. Like gold, platinum particles can accumulate in alluvial sands in rivers.

According to Johnson Matthey, some 187.6 tonnes of platinum was mined in 2019. Production is very concentrated geographically, with South Africa accounting for nearly three quarters (72.9%) of the annual total. Other significant producing countries include Russia (12.0%), Zimbabwe (7.5%) and the United States (5.4%). Leading platinum mining companies include Sibanye-Stillwater, Anglo American Platinum, Impala Platinum, Norilsk Nickel, Aquarius Platinum, Northam Platinum, Vale and Glencore. 

History

The first records of platinum date back to its importation into Egypt in the 12th Century BC. However, the European discovery of ‘platina’ (‘little silver’) is usually credited to Spanish explorer Antonio de Ulloa in 1748 and its formal identification as an element to an English scientist, William Brownrigg, in 1750. Unfortunately, continued difficulties in extraction meant that samples were not readily available in commercial quantities until c. 1805. This, together with a lack of practical applications for many of platinum’s properties, meant that most platinum was largely used as jewellery and other fine items until the 20th Century. 

Footnotes

1 -  MSCI AC Equity and Global Aggregate
2 - “The Long Economic Hangover of Pandemics”, June 2020, Oscar Jorda, Sanjay Singh, Alan Taylor
3 -  A hydrogen strategy for a climate-neutral Europe, July 2020

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