Bloomberg News

South African ETP Proposals Seen Boosting Precious-Metals

March 04, 2013

South Africa’s proposal to ease domestic restrictions on exchange-traded products may increase demand for precious metals, according to Deutsche Bank AG.

A limited number of financial institutions have been allowed to operate gold-backed ETPs and the government proposes to open products to other qualifying institutions and allow more funds, including platinum, the National Treasury said Feb. 27. The products would be classified as domestic assets for prudential purposes, it said.

Investment by South African institutions and individuals in the ETPs has been limited because it formed part of offshore or foreign-investment allowances, Deutsche Bank said in a Feb. 28 report. The proposed new classification would increase investment options and may boost demand as more providers offer products, the bank said. The bank said it was unclear whether palladium and rhodium ETPs could be set up under the definition of commodity ETPs.

“It could be beneficial for both,” Michael Lewis, head of commodities research at Deutsche Bank in London, said by phone today, referring to gold and platinum. “If you classify them as domestic assets, then the proportion that you’re allowed to hold in them increases.”

Investors own 2,506 metric tons of gold valued at about $127.1 billion through ETPs, data compiled by Bloomberg show. Assets are down 4.8 percent from the Dec. 20 record. Investors own 19,594.3 tons in silver products, 51.2 tons of platinum and 67.2 tons of palladium. South Africa is the biggest platinum producer and the second-biggest palladium miner, London-based Johnson Matthey Plc estimates.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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