Maxwell Gold

Director Investment Strategy

Investment Insights

August 2016

Platinum: a tale of two consumers

Summary

Autocataly st

Jewelry

Industrial

Inv estm ent

Total

Europe

19%

3%

5%

0%

27 %

North Am erica

5%

3%

5%

2%

14%

Japan

5%

4%

2%

2%

14%

China

3%

20%

3%

0%

26%

India

0%

1%

0%

0%

1%

9%
41%

1%
32%

8%
23%

0%
4%

18%

Others
Total

Source: Metals Focus, ETF Securities. Table data from 1/1/11 to 12/31/15. See
important information for further details.

Chinas growing middle class should remain

supportive for future platinum jewelry demand
Platinum jewelry fabrication in China fell approximately 8% last
year with signs indicating this trend may persist throughout 2016.
The jewelry sector in China has seen an overall slowdown in line
with the countrys economic challenges. In response, consumers
have tightened their belts, with the memory of last years equity
market pullback still fresh and weighing on consumer sentiment.
The Chinese jewelry industry has also struggled to operate in this
economic backdrop as smaller fabricators have been driven out of
the market while larger producers have downsized.

Share of Global GDP

16%

55%

Consumption as % of GDP

50%

14%

12%

45%

10%
8%

40%

6%
4%

35%

2%

0%
2014

2012

2010

2008

2004

2006

2002

1998

2000

30%
1994

Table 1: Platinums fate remains tied to Chinese jewelry

and European auto demand
Average Annual Demand (2011-2015) by sector and region

18%

1996

Platinum demand is most often associated with the European

automotive market, which accounts for 19% of average annual
demand for use in catalytic converters for diesel passenger vehicles.
What is less recognized is that over the last 5 years the largest
contributor to demand (20%) has stemmed from another consumer
segment Chinese jewelry (see Table 1).

Exhibit 1: China still remains a global growth engine with

lots of pent up potential consumption

1992

Despite tepid growth and continued uncertainty, the global

consumer has remained a resilient driving force in many
economies. In the case of platinum the continuation of healthy
consumer spending will remain a critical driver for future demand,
particularly among two consumer segments which have accounted
for nearly 40% of average annual consumption.

1990

Tighter emission standards and strong auto sales may add

further support to platinum demand in Europe.

1986

1988

Continuing rising incomes and a growing middle class could

continue to benefit platinum jewelry demand in China.

1982

Recent changes in consumer preferences and spending habits have

also impacted the platinum jewelry market. Last year saw
consumer budgets shift to other discretionary purchases such as
domestic travel and vacation expenditures. This was doubly
impactful for the jewelry market as more consumers were traveling
during holidays and foot traffic in jewelry stores fell during periods
of traditionally high consumer spending.

1984

Among platinums diverse sources of demand, European and

Chinese consumers remain the core drivers.

1980

Source: International Monetary Fund, World Bank, ETF Securities. Exhibit data from
1/1/1980 to 12/31/14. See important information for further details.

Despite these challenges, there are several themes that lend

support for the outlook of Chinas platinum jewelry demand. China
currently has the lowest consumption level relative to its gross
domestic product (GDP) compared to the average emerging market
economy and well below developed markets. Meanwhile, its share
of global GDP was 17% at the end of 2015 and expected to reach
nearly 20% by the end of 2021 (see Exhibit 1).
China will continue to play a key role in global growth in years to
come as it continues to transition from an industrial to consumer
driven economy supported by a growing middle class. As income
per capita is expected to continue to rise in coming years, this may
result in China moving higher up the consumption ladder. This
would see marginal spending shift from consumer staples like food
to consumer discretionary goods and services (like appliances and
health care) and eventually reach higher levels of luxury goods.
Given Chinas strong cultural taste for jewelry, higher spending
capacity of a growing consumer base would likely see jewelry
demand persist. Chinas growing middle class consumer has
already driven several themes which may continue to serve as a
boon for platinum demand. While gold jewelry still comprises the

1
Past performance is no guarantee of future results.

Source: Bloomberg, ETF Securities. Exhibit data from 12/31/2013 to 6/30/16. See
important information for further details.

The Brexit vote appears to have weighed on car sales in July as

European light vehicle sales fell 1.7% year over year and July new
passenger car registrations in fell 43% in the United Kingdom (UK).
The full impact on European car sales emanating from Brexit
remains uncertain, but July UK retail sales rose 5.9%, beating
expectations, which may signal Brexits impact on the consumer
was temporary. Overall, the European auto industry remains
buoyant with improving employment and low financing costs may
continue to entice consumers in other economies as well.
What should help soften any potential impact from Brexit on
European car sales is the continued utilization of diesel engines and
increased loadings of platinum used in diesel autocatalysts to meet
higher emission and fuel efficiency standards. While diesel vehicles
in Europe generally have lost market share in recent years to
gasoline engines (which utilize palladium over platinum in

Exhibit 3: Speculative investors have driven the year to

date rally in platinum so far

76

Global known ETF holdings of platinum (lhs)

Net speculative positioning in platinum futures contracts (rhs)
45,000

75

40,000

35,000

74

30,000

73

25,000

72

20,000

15,000

71

10,000

70

5,000

69

Managed Money Gold Fut ures

Cont racts

Jun-16

Feb-16

Apr-16

Oct-15

Dec-15

Jun-15

Aug-15

Feb-15

Apr-15

Oct-14

Dec-14

Jun-14

Aug-14

Feb-14

Apr-14

0.0

Aug-16

1.0
0.5

As shown in Exhibit 3, long positioning in futures markets have

moved to match the price of platinum while ETF investors have yet
to enter the market in force through ETFs as has been the case seen
for gold and silver. The current lack of interest by ETF investors
leaves platinum potentially open to heightened volatility and price
swings driven more by investor speculation and less by
fundamentals in the short term. In the long term, the fundamentals
for platinum supply and demand remain constructive.

Jul-16

1.5

Jun-16

2.5
2.0

May-16

3.0

Dec-13

% Change (y ear over year)

2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0

3.5

As of August 15th, platinum has risen 26% year to date as it has

caught up to the strong year to date performance of its precious
metal peers, gold and silver. Unlike gold and silver, which have
seen a large influx of investor demand through exchange traded
fund (ETF) flows, platinum ETFs have seen slight net redemptions
globally so far in 2016. The driver of platinum appears to be
speculative investment as represented by net futures contracts held
by money managers.

Apr-16

European Retail Sales (lhs)

European Vehicle Sales (rhs)

4.0

Unit Sales (m illions)

Exhibit 2: European car sales continue to trend higher

despite slower overall consumer spending

Investment Outlook

Mar-16

Despite Europes turbulent economy, growth is continuing to

recover and consequently European light vehicle sales remain
robust and continue to trend higher while overall retail sales in
Europe have slumped so far this year (see Exhibit 2). This spells
good news for platinum since according to Thomson Reuters
GFMS, 84% of European autocatalyst platinum demand in 2015
was used in the light diesel sector.

Going forward further reliance on diesel engines will remain a key

component for automakers to meet European fuel efficiency
targets. By applying the latest after treatments, diesel engines
generate less pollution and offer better fuel efficiency than gasoline
engines. This may be a continued boon for platinum demand as
diesel engines strengthen their foothold in the European auto
market. This comes at a time when fuel efficiency and
environmental impact remain key themes among consumers.

Feb-16

Another key consumer segment for platinum stems from passenger

vehicles in Europe. Platinum is a key component in autocatalysts
for diesel engines, which due to tax advantages makes up the
majority of the European passenger car fleet.

Eur0 6 put tougher limits on nitrogen oxide (NOx) emissions for

automakers. While autocatalysts are not the primary technology to
abate NOx emissions (lean NOx traps and selective catalytic
reductions are used in the after-treatment for this purpose),
according to Johnson Matthey, platinum can help optimize the
process. Metals Focus estimates that this increased the average
platinum loadings in catalysts by 10% in 2015 to compensate for
the new emission standards, a trend likely to persist this year.

Jan-16

Strong European car sales and tighter emission

standards may paint brighter platinum outlook

autocatalysts), the introduction of the Euro 6 emission standards in

2015 helped offset this secular trend and may continue to positively
impact platinum demand in years to come.

Met ric t onnes of platinum

bulk of demand, platinum jewelry in China has grown in popularity

among younger consumers (millennials), which are a key and
growing component of the middle class consumer market. Growing
acceptance of platinum jewelry as gifts may be further supported by
new product designs and promotions for platinum jewelry targeted
at this segment during festivals such as Chinese Valentines Day.
Additionally, expansion into new consumer markets among Chinas
third and fourth tier cities may further cement acceptance and
expand platinum jewelry demand in the long run.

Source: Bloomberg, CFTC, ETF Securities. Exhibit data from 12/31/2016 to 8/12/2016.
See important information for further details.

2
Past performance is no guarantee of future results.

Important Information
The statements and opinions expressed are those of the author and are as of the date of this report. All information is historical and not indicative of
future results and subject to change. Reader should not assume that an investment in any securities and/or precious metals mentioned was or would
be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results.
The ETFS Silver Trust, ETFS Gold Trust, ETFS Platinum Trust, ETFS Palladium Trust and Precious Metals Basket Trust are not
investment companies registered under the Investment Company Act of 1940 or a commodity pool for purposes of the
Commodity Exchange Act. Shares of the Trusts are not subject to the same regulatory requirements as mutual funds. These
investments are not suitable for all investors. Trusts focusing on a single commodity generally experience greater volatility.
Commodities generally are volatile and are not suitable for all investors. Trusts focusing on a single commodity generally experience
greater volatility. Please refer to the prospectus for complete information regarding all risks associated with the Trusts. Shares in the Trusts are not
FDIC insured and may lose value and have no bank guarantee.
The value of the Shares relates directly to the value of the precious metal held by the Trust and fluctuations in the price could materially adversely
affect investment in the Shares. Several factors may affect the price of precious metals, including:

A change in economic conditions, such as a recession, can adversely affect the price of the precious metal held by the Trust. Some metals
are used in a wide range of industrial applications, and an economic downturn could have a negative impact on its demand and,
consequently, its price and the price of the Shares;
Investors expectations with respect to the rate of inflation;
Currency exchange rates;
interest rates;
Investment and trading activities of hedge funds and commodity funds; and
Global or regional political, economic or financial events and situations. Should there be an increase in the level of hedge activity of the
precious metal held by the trust or producing companies, it could cause a decline in world precious metal prices, adversely affecting the
price of the Shares. Should there be an increase in the level of hedge activity of the precious metal held by the Trusts or producing
companies, it could cause a decline in world precious metal prices, adversely affecting the price of the shares.

Also, should the speculative community take a negative view towards the precious metal held by the Trusts, it could cause a decline in prices,
negatively impacting the price of the shares. There is a risk that part or all of the Trusts physical precious metal could be lost, damaged or stolen.
Failure by the Custodian or Sub-Custodian to exercise due care in the safekeeping of the precious metal held by the Trusts could result in a loss to
the Trusts.
The Trusts will not insure its precious metals and shareholders cannot be assured that the custodian will maintain adequate insurance or any
insurance with respect to the precious metals held by the custodian on behalf of the Trust. Consequently, a loss may be suffered with respect to the
Trusts precious metal that is not covered by insurance.
Commodities generally are volatile and are not suitable for all investors.
Please refer to the prospectus for complete information regarding all risks associated with the Trust.
Investors buy and sell shares on a secondary market (i.e., not directly from Trusts). Only market makers or authorized
participants may trade directly with the Trusts, typically in blocks of 50k to 100k shares.
Definitions: The Federal Reserve (Fed) is the central banking system of the United States of America and the Federal Open Market Committee (FOMC) is a
committee within the Fed charged under the United States law with overseeing the nation's open market operations. The European Union (EU) is a politicoeconomic union of 28 member states that are located primarily in Europe. The U.S. Commodity Futures Trading Commission (CFTC) is an independent
agency of the US government that regulates futures and option markets. Gross domestic product (GDP) is the monetary value of all the finished goods and
services produced within a country's borders in a specific time period. The International Monetary Fund (IMF) is an international organization created for
the purpose of standardizing global financial relations and exchange rates. The World Bank is an international organization dedicated to providing financing,
advice and research to developing nations to aid their economic advancement. Brexit is an abbreviation for "British exit," which refers to the June 23, 2016,
referendum whereby British citizens voted to exit the European Union. Year over year = the percent change over a full calendar year.

Commodities generally are volatile and are not suitable for all investors. This material must be accompanied or preceded by
the prospectus. Carefully consider each Trusts investment objectives, risk factors, and fees and expenses before investing.
Please click here to view the prospectus.
ALPS Distributors, Inc. is the marketing agent for ETFS Silver Trust, ETFS Gold Trust, ETFS Platinum Trust, ETFS Palladium
Trust and ETFS Precious Metals Basket Trust.
Maxwell Gold is a registered representative of ALPS Distributors, Inc.
ETF000994 08/31/17

ETF Securities (US) LLC

48 Wall Street
New York
NY 10005
United States

t +1 844 ETFS BUY (844 383 7289)

f +1 212 918 4801
e infoUS@etfsecurities.com
w etfsecurities.com