ETF Showdown: Platinum Vs. Palladium

There was an old ad campaign that referred to pork as the “other” white meat. In the world of precious metals, palladium and platinum are the “other” white metals after the more heralded yet far cheaper silver. Trading isn't a popularity contest, but if it were, palladium would be the homecoming king of precious metals in 2010 while platinum would just be hoping for a ride to the dance. The ETFS Physical Platinum Shares PPLT and the ETFS Physical Palladium Shares PALL both made their debuts in January 2010 as the first ETFs backed by physical holdings of the metals to be introduced to U.S. investors. While both funds have done an admirable job of attracting assets under management (ETF Securities offers six ETFs to U.S. investors with a total of $3.5 billion AUM), the devil isn't in the details so much as he is in the performance. Put another way, PALL is up 70% since its debut, while PPLT is up just 10%. Sure, the outlook for platinum in 2011 is fairly bullish. Jewelry demand will help to some extent and if Europe's economy bounces back, that would be a positive catalyst for platinum prices as many cars driven by Europeans are produced with platinum catalytic converters. Barclays Capital recently issued a note to investors saying ETF platinum holdings are surging and LGT Capital Management raised its 2011 average forecast for platinum by 3.5% to $1,888 an ounce. All that said, PALL and palladium look like the better bet. Using the automotive market as a potential catalyst, palladium is used for catalytic converters in American and Chinese cars and those are the two biggest auto markets in the world. Palladium prices have already surged five-fold since 2008, but Royal Bank of Scotland expects the metal to continue its bullish ways this year. LGT chimed in, saying palladium prices could average $888 an ounce and trade as high as $1,111 an ounce this year. And for the investor that just can't decide between palladium and platinum this year, ETF Securities has you covered with the ETFS Physical Precious Metals Basket Shares GLTR and the ETFS White Metals Basket Trust WITE, two new funds that offer simultaneous exposure to both metals.