Record amount of platinum, palladium dumped by investors

INVESTORS dumped a record amount of platinum and palladium from funds backed by the metals last month on concern that demand would ease in the aftermath of the Volkswagen emissions scandal.

Platinum holdings in exchange-traded products slid 5.8 tons while those of palladium dropped 8.3 tons in October, the most since at least 2007, data show. Combined, the assets have slipped almost 10 percent since it emerged in September that Volkswagen had rigged diesel vehicles to help them pass emissions tests.

Both metals are mainly used to curb vehicle emissions, and investors may be concerned that car makers would turn to alternative methods for reduc- ing the gases, such as shifting to more battery-powered cars, according to Deutsche Bank.

That would cut demand for platinum that’s mainly used in diesel engines and palladium that’s favoured in petrol types. Car companies accounted for 45 percent of platinum demand and 80 percent of palladium consumption last year, Johnson Matthey estimates.

“Diesel-gate has certainly had an impact on investor sentiment in the platinumgroup metals,” Grant Sporre, an analyst at Deutsche Bank in London, said.

“There is a fear that platinum and palladium may lose market share to alternative technologies for reducing car emissions.”

Investors sold 1.2 tons of platinum from exchange traded products (ETPs) on Friday, the most since June, and are holding the least since April 2014. They sold 2.8 tons of palladium on Friday, the most in more than a year, and own the smallest amount since May 2014.

A reduced appeal of using platinum and palladium as a currency and equity hedge in South Africa also contributed to the outflows, Sporre said.

The largest platinum ETP and the second-biggest palladium product are listed in the country.

Prices have fared better in recent weeks. Platinum, trading at $974.80 an ounce in London, has rebounded about 9 percent since touching a six-year low on October 2.

Palladium climbed 27 percent since reaching a five-year low in late August. It was at $661.33 an ounce in London on Monday. – Bloomberg