Platinum bulls have been gabbing about the prospects for a platinum exchange-traded fund (ETF) for years.  Given the popularity of physical bullion ETFs like the $10 billion streetTRACKS Gold (NYSE: GLD) fund, many figured it was only a matter of time before a fund company launched a physical platinum ETF. The idea had everyone excited, because the world's platinum markets are very tight, and new investment demand from an ETF could push prices up. A rumor in November 2006 that Barclays Global Investors was about to file an ETF pushed prices up 27 percent in two trading sessions.

Soon, we'll see if all that excitement had a basis in reality-at least in the U.K. ETF Securities, the commodity ETF leader in Europe, rolled out new physical ETFs tied to platinum, palladium, silver, gold and a combined basket of those four metals. The funds launched on the London Stock Exchange (LSE) and are:

• ETFS Physical Platinum LSE code: PHPT
• ETFS Physical Palladium LSE code: PHPD
• ETFS Physical Silver LSE code: PHAG
• ETFS Physical Gold LSE code: PHAU
• ETFS Physical PM Basket LSE code: PHPM

Strangely, this may be a case where the more popular metals make less popular ETFs.  The gold ETF will be the second gold bullion ETF to trade in London, joining the Gold Bullion (GBS) fund from the World Gold Council. The silver ETF is likely to be more popular, as it will be the first silver bullion ETF on the market in London.  But the real story will certainly be the platinum ETF, given the high levels of anticipation surrounding its launch. (The palladium ETF is likely to be less popular, as there is plenty of palladium and prices have trailed other metals.)

Will the new ETF drive prices higher? It's way too early to say.  That depends in part on how much investor demand materializes.  But big players are watching: Anglo Platinum, which accounts for 40% of all platinum production worldwide, said earlier that it would not supply metal to a planned platinum ETF in Switzerland. (The Swiss fund is expected to be launched by Zurich Cantonal Bank in May.)

"We are opposed to the startup of an platinum ETF and feel that other producers will be too," said Trevor Raymond, senior investor relations manager at Angloplat, in the Metals Place article. "It takes physical metal away from metal demand-which pushes up prices and limits offtake for jewelry."

The world's second largest platinum miner, Impala Platinum, agreed:

"The market is very tight indeed and this would draw more metal off the physical market, sending prices skywards, said Bob Gilmour, investor relations manager at Impala Platinum, in a miningMx article. "The producers do not want prices rocketing higher."

It's not clear how or if Angoplat and Impala will work with the new London-based fund, although if they disliked the Swiss ETF, they're unlike to smile on the British version.

How tight are supplies? No one really knows. Producers currently sell very little metal into the spot market, so things may look worse than they appear; as demand rises, supply to that market may well increase. But the world has been operating on a platinum deficit for the past eight years, and only seven million ounces of platinum are mined each year. With prices at $1,300/ounce, that's about $9 billion worth of new platinum worldwide.  It's a stretch to imagine the ETF gathering $1 billion in assets this year, but it's possible; a success like that could certainly impact prices.

It's worth noting, of course, that there's nothing wrong with that. The ETF is just a tool to allow investors access to the commodity; as long as they understand the accompanying risks, who's to say people shouldn't access these markets.

Prices have been fairly flat since the ETF Securities announcement this morning: either investors don't believe that a U.K. fund will attract substantial assets, or they believe that any growth has already been priced in. News of a U.S.-based ETF would likely have a more substantial impact.