A platinum ETF is a special type of exchange traded fund that is designed to track the price of platinum. Platinum ETFs are open ended mutual funds fully backed by insured physical platinum bullions.
Platinum ETFs allow investors to own platinum and gain exposure to its price without the inconvenience (and risk) of storing physical platinum bars or coins. Each certificate or share entitles the holder an ownership to a specific amount of platinum.
To pay for management fees and also for the storage and insurance of the physical platinum metal, a small amount of the precious metal is sold periodically. Hence, the amount of platinum represented by each certificate decline over time.
Like all securities, there is a commission (typically around 0.4%) for buying or selling platinum ETFs. In some countries, investing in platinum ETFs is a way to avoid the sales tax or the VAT which would apply when buying physical platinum coins and bars.
Up till today, the only platinum ETF available to investors is the ETFS Physical Platinum (PHPT) launched by ETF Securities Ltd on the London Stock Exchange. More platinum ETFs are expected to be launched although the major platinum producers are not in favor of them since the resultant hoarding of platinum bars will take away supply of the scarce precious metals that are needed by the auto and jewelry indusrtries, pushing up prices dramatically and encouraging the sourcing of replacement materials.
How to Start Trading Platinum ETFs
To buy or sell platinum ETFs, you need to open a trading account with an online stock brokerage such as TD Ameritrade. We recommend TD Ameritrade as they provide a virtual trading platform where beginners can try out stock trading in real market conditions without using real money.