Platinum and palladium prices surged on Thursday after a UK firm came a step closer to launching the first US exchange-traded funds on the precious metals used for purifying auto emissions. The US Securities and Exchange Commission approved a proposed rule change on Tuesday to list and trade shares of the Platinum and Palladium Trusts proposed by London-based ETF Securities, the SEC's website said on Thursday.
Analysts anticipated a rush of investment dollars into the market for PGM, or platinum metals group, if ETFS is given the final nod to list. Tuesday's SEC approval is to be followed by compliance checks by NYSE Arca, a trading platform owned by NYSE Euronext where the funds are to list.
"The ETF story is interesting because ... it doesn't take a lot of money to make platinum and palladium move up," said George Gero, vice president with RBC Capital Markets Global Futures in New York. "This comes at a time when the automobile industry is making noises about recovery," Gero said.
According to industry data, more than half of the world's platinum supply is used in making the catalytic converters that clean the emissions released by motor vehicles. Spot platinum hit a one-week high above $1,466 an ounce by 2:15 pm EST (1915 GMT), up from the $1,418.50 level seen late Wednesday.
The January platinum contract on the COMEX metals division of the New York Mercantile Exchange settled up $41.10, or almost 3 percent, at $1,467.90 an ounce. Spot palladium hit three-week peaks at $386 an ounce, up from late Wednesday's $355.50 level. COMEX palladium for March finished up $32.30, or 9 percent, at $389.65 an ounce. Gold prices rose more than 1 percent as the dollar fell. Analysts said moves in gold were partly exaggerated due to low liquidity caused by the Christmas holiday period.
But the supply-demand factors that sent gold to all-time highs of nearly of $1,230 an ounce in early December were still intact, some said. "Gold's rising because of a weaker dollar," said Daniel Smith, analyst at Standard Chartered. "But also the recent sell-off was a bit overdone as a lot of the factors that supported gold are still in place."
The dollar fell after weak US housing data the previous day dampened optimism about the outlook for the US economy. A weaker dollar makes gold cheaper for non-US investors and boosts its appeal as an alternative asset. Spot gold, which reflects trading in bullion, stood at $1,104.45 an ounce, against the $1,087 level seen in New York late on Wednesday.
Bullion had tumbled to a seven-week low of $1,074.10 earlier this week, but at current levels, was set to post its biggest one-day percentage gain in more than three weeks. COMEX gold for February finished up $10.80 at $1,104.80 an ounce. Among other precious metals, spot silver was bid at $17.43 an ounce against Wednesday's $17.09. COMEX silver for March ended up 25 cents, or 1.5 percent, at $17.44 an ounce.