The increase in auto demand, as well as news of a $153 billion economic stimulus package in Japan (typically a huge consumer of platinum), have helped to send prices of both metals back up to their highest levels in six months.

Although industrial demand remains shaky, it hasn't stopped individual investors from seeking out platinum and palladium as safe havens, judging by the success of ETFS' existing European funds. ETFS' Physical Platinum ETF (LSE: PHPT.L) and Physical Palladium ETF (LSE: PHPD.L) have skyrocketed over the first three months of 2009, with the platinum fund's holdings rising 87% and palladium's rising 64%.

"The surge of inflows into physically-backed precious metals ETCs in the first quarter is unprecedented and reflects investors' concerns about current highly uncertain economic and financial conditions," Nicholas Brooks, ETFS Head of Research and Investment Strategy, told Commodity Online.

Playing Platinum And Palladium Before The Launch

If ETFS succeeds in launching its platinum and palladium ETFs, the funds would surely drive up demand, since investing in the fund would mean taking physical metal off the market and storing it in a vault. Therefore, investors may want to consider entering the platinum and palladium markets before that demand surge occurs.

To do so, U.S. investors have several pure-play options available to them. For example, NYMEX offers futures contracts for both platinum and palladium, trading in lot sizes of 50 troy ounces and 100 troy ounces, respectively.

Investors can also check out ETNS like the E-TRACS UBS Long Platinum ETN (NYSEArca: PTM), the E-TRACS UBS Short Platinum ETN (NYSEArca: PTD) or the IPath Dow-Jones AIG Platinum Total Return Sub-Index ETN (NYSEArca: PGM - although as credit notes, these instruments don't hold any physical bullion. Another ETN, the Elements MLCX Precious Metals Plus Index (NYSEArca: PMY), which held positions in both metals as well as gold and silver, closed earlier this year.

But given the potential for future price increases, individual platinum and palladium mining companies might be the best bet. Many miners only trade on foreign exchanges, but some companies available to American investors include:

• Stillwater Mining Co (NYSE: SWC), a Montana-based company that mines, refines and markets palladium and platinum. (Brad Zigler investigated this company in detail last year in "Good Days for Palladium?")
• Anglo American PLC (Nasdaq: AAUK), which mines a range of metals, as well as diamonds and coal.
• North American Palladium (AMEX: PAL), which despite its name also mines platinum, copper and nickel.

Want To Know More?

Learn about the platinum-to-palladium ratio in "Platinum's Poorer Relation: Palladium" and the effects of last year's platinum hoarding for European ETFs in "Platinum Supplies Hoarded By ETFs."

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