Supply And Demand To Support New Metals ETF

As the overall health of the US labor force continues to remain in question and Central Banks in the developed world continue to implement loose monetary policies, the appeal of metals remains intact resulting in the introduction of ETF Securities newest metals ETF, the ETFS Physical White Metals Basket Shares (WITE).

WITE, which started trading today, is the first US physically backed ETF to exclusively hold silver, platinum and palladium in equal fixed weights.  According to the prospectus, the Shares of WITE represent beneficial interest in the Trust, which holds physical allocated silver, platinum and palladium bullion held in vaults by the JP Morgan Chase (JPM). The silver is expected to be held in vaults in London, while Platinum and Palladium are expected to be held in London or Zurich.    

The newly created ETF seeks to track the spot price of all three metals and carries an expense ratio of 0.60%. 

As for the future of the ETF, both platinum and palladium are expected to witness increased demand due to their roles in emissions reduction in automobiles and diesel-fuelled trucks.  As for silver, it carries many of the same characteristics as it sister metal, gold, and is heavily used in the industrial sector.

In regards to global demand for these metals, as nations around the world continue to improve emissions standards on vehicles demand for platinum and palladium will remain.  As for silver, demand is likely to be supported from global economic growth, which will likely boost the industrial sector, as well as overall fear in the recovery of the US economy. 

On the supply side, production of newly mined platinum and palladium is expected to remain insufficient to satisfy demand and the supplies of recycled platinum are slowly dwindling away.  As for silver, a shortage is on the horizon.  Annual world consumption has been outpacing production for nearly two decades, eating away at stockpiles.  Furthermore, nearly 65-70% of global silver production comes through electrolytic copper refining, gold, nickel and zinc refining. As a result, a significant amount of silver cannot be produced without disruption to other mining activities leading to the overproduction in other metals, making silver supply from mining relatively inelastic and insensitive to price changes.

In a nutshell, the outlook of platinum, palladium and silver remains bright, and will likely enable WITE to reap the benefits in the near future.

Disclosure: No Positions

Categories: ETFs

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