Updated 18th February 2008

The announcements regarding the launch of two exchange-traded funds, or ETFs, in platinum caused some turbulence in the platinum price during May 2007.

Exchange-traded funds exist in a variety of other commodities, including gold and silver, and are constructed to allow investment into specific commodities without the investor having to take physical delivery or enter the futures markets. A platinum ETF, backed by platinum bullion, should withdraw some liquidity from the market, which has significantly lower stocks of refined metal than either the gold or silver markets. With platinum supply and demand continuing to be finely balanced, this has the potential to be disruptive to the price, creating some upward pressure and potentially increasing the metal price's volatility, as was seen on the original announcements (in April and May 2007) that these funds were to be launched.

As of mid-July, these funds held roughly 50,000 oz of platinum and somewhere in excess of 100,000 oz of palladium between them. This metal has been bought without causing undue disturbance to the market. The positions in both platinum and palladium continued to grow slowly throughout the Northern hemisphere summer months and roughly 280,000 oz of palladium had been bought through exchange traded funds by the end of 2007.

However, in the platinum funds, the rapid ramp-up in price seen in November and December created significant investor interest. A mixture of individual investors and some funds bought platinum exchange traded funds even with the metal trading at record prices. With some hefty net purchases of metal, holdings of platinum in the various ETFs rose quickly from roughly 70,000 oz at the end of September to almost 200,000 oz at the end of the year. Further remarkable price strength in late January and early February brought out more buying. As of mid-February, the combined positions of the various platinum funds was 330,000 oz.