Commodity ETF Alert August 2014 Issue
Commodity Outlook: Platinum
As you know, we cut the iPath DJ-UBS Platinum ETN (PGM) from the Commodity ETF Alert portfolio last month. The platinum tracking ETN had become too thinly traded and unreliable for our needs.
But as I mentioned in last month’s update, I’m still firmly bullish on platinum.
That’s why we’re replacing PGM with a different platinum tracking ETF today. This time around we’re going with the ETFS Physical Platinum Shares (PPLT). While it’s priced higher than PGM, PPLT is more liquid.
As a result, PPLT will track the price of platinum more accurately.
And keep in mind…
Despite the recent restart of South African mines, there’s still considerable worry over platinum availability. In fact, analysts at CPM Group foresee an 814,000 ounce supply deficit lasting through the end of this year.
Why such a hefty shortfall?
Anglo American Platinum, the world’s largest platinum miner, recently announced a 40% drop in platinum production for the first half of 2014. Not surprisingly, neighboring miners, Lonmin and Impala Platinum, also saw large output declines over the past six months.
While production is expected to ramp up into year end, there’s still considerable doubt as to how viable the South African platinum mining industry really is. Costs have soared in recent years while the price of platinum has dropped considerably.
That’s why Anglo American is selling some of their South African platinum mine holdings in a bid to purge underperforming assets.
The writing is on the wall here folks…
When the world’s largest platinum miner wants to decrease its stake in the industry, it’s a glaring sign things are not well.
Why is this bullish for platinum you ask?
Demand for the metal is increasing quickly. As you may know, the metal is heavily used by the automobile industry. In fact, just under 50% of total global platinum demand is consumed by this one industry.
And with global auto sales reaching all-time highs in 2014, need for the metal is quickly outpacing supply.
As usual, I’ll give you more details on our new position in the ETFS Physical Platinum Shares (PPLT) in our upcoming monthly update. For now, just focus on getting into PPLT at any price under $144.50 a share.
Let’s look at a chart…
Technically Speaking:
As you can see, PPLT has been trading in a defined uptrend since late 2013. I expect this uptrend to continue for the foreseeable future.
WHAT TO DO NOW:
ETFS Physical Platinum Shares (PPLT) is trading at $143.84
Buy PPLT up to $144.50 per share
Our profit target is $155.00 or more
Category: Commodity Trading
