Playing Precious Metals Through ETFs

Step aside gold, its platinum and palladium’s time to shine. The two metals are off to a strong start this year, sending exchange-traded funds indexed to the precious metals to 17-month highs.

Palladium prices are up 11% so far this year while Platinum has rallied nearly 10%. Supply worries due to mine closures in South Africa coupled with reports that Zimbabwe’s government is seizing land from platinum producer Zimplats Holdings are raising fears of a supply shortage, and investors are looking to cash in.

Strong auto sales in the U.S. and China are also adding demand since both platinum and palladium are used in catalytic converters. U.S. automakers reported a 14.2% sales increase in January from a year earlier while China reported a 46% surge.

Palladium Trust ETF (NYSE:PALL) is up 8.4% since the beginning of the year and has attracted more than $33.6 million of inflows.

Physical Platinum Shares (NYSE:PPLT) and the First Trust ISE Global Platinum Index ETF (NYSE:PLTM) have gained 11.16% and 11.17%, respectively, since January 1st.

And the rally may still have legs.

“Platinum is going to continue to be a star performer this year,” said James Cordier, Liberty Trading Group principal and founder. “I expect the rally to continue as supply concerns and strong auto sales boost demand for the metal.”

And while platinum and palladium’s performance is outshining gold, some investors say now is the time to buy the precious metal that’s currently trading near 6-months lows.

“The reasons for the recent sell-off will prove to be bullish for the metal later this year,” said Cordier. “I expect gold to reach $1,700 an ounce by the second or third quarter.”

The price of gold continued to fall this week following a report by the World Gold Council showing world demand declined by 0.4% to 4,405.5 metric tons last year.

“Now is a good time to add positions in gold,” said Cordier. “Gold is a great buy at these levels. I think  we’re trading probably $50 to $75 below prices we will see later this year.”

The SPDR Gold Shares (NYSE:GLD), the popular exchange traded fund that mirrors the price of gold, is down 2.27% so far this year.