LIVE MARKETS-Platinum ETFs: a quiet shift worth watching
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PLATINUM ETFs: A QUIET SHIFT WORTH WATCHING
In the world of precious metals, platinum has long played the role of the quiet sibling, overshadowed by gold's glitter XAU= and palladium's XPD= industrial boom.
But it surged 36% in the second quarter as Chinese imports rose and supply from major producer South Africa declined, following early stockpiling on the NYMEX exchange amid U.S. import tariff fears.
In June alone, prices jumped 28% as hedge funds and speculative traders piled in, driving the strongest monthly rally since 1986 and lifting prices to an 11-year high of $1,432.6 per ounce.
Yet beneath the surface of this rally lies a quieter, potentially market-moving story: exchange-traded fund (ETF) investors are now sitting on substantial unrealized gains.
According to J.P. Morgan estimates, a significant portion of global platinum ETF holdings, about 630,000 ounces, were accumulated at prices between $800 and $900 per ounce. With spot prices XPT= now hovering over $1,300, these positions are approaching a 50% return, JPM analysts say.
This is significant because historical patterns suggest that ETF investors may begin to reduce their exposure once returns reach this level.
During palladium’s rally from 2016 to 2020, ETF outflows picked up once prices moved well above the average cost base of holdings. These outflows added supply to the market and influenced price dynamics.
J.P. Morgan suggests platinum could follow a similar path if investors decide to realize gains.
ETF outflows represent a potential source of additional supply. When investors sell ETF shares, the underlying metal is often released into the market.
In terms of exchange stocks, lingering risks of a Section 232 tariff on platinum could curb further NYMEX exchange draws until greater certainty around a potential tariff becomes clear, J.P.Morgan says.
"This leaves ETF holdings as both the largest and potentially quickest reacting source of additional supply".
(Joel Jose)
EARLIER ON LIVE MARKETS:
GROWTH CHUGGING ALONG VS VALUE CLICK HERE
BEARISH POSITIONING COULD FAVOUR OF ASML ON EARNINGS DAY CLICK HERE
US VS. CHINA: WHY COULD EUROPE PAY THE PRICE? CLICK HERE
EUROPEAN STOCKS UNFAZED BY TRUMP TARIFF UPDATE CLICK HERE
EUROPE BEFORE THE BELL: STOCK FUTURES STEADY AS TARIFF SHOW ROLLS ON CLICK HERE
TARIFF DEJA VU TAKES HOLD CLICK HERE
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