Copper, Base Metals ETFs Hit in Sell-Off
November 17th 2011 at 1:06pm by Tom Lydon
Exchange traded funds indexed to copper and base metals fell with global equities Thursday on worries Europe’s debt crisis will freeze the economic recovery.
In precious metals, silver ETFs paced the declines. [Silver ETFs Fall]
Precious metals have enjoyed the spotlight as investors look to safe havens due to the sour news coming out of the Eurozone.
However, investors can also watch copper and base metal ETFs to get a sense of the market’s sentiment on the global economy.
“Prospective investors should note that base metals represent a relatively small fraction of the broad commodities universe and generally play supporting roles in major, broad commodity indexes,” says Morningstar analyst Abraham Ballin.
“Commodities have been shown to offer diversification benefits to a standard stock and bond portfolio, and investors will be enticed by the fact that despite low long term returns, commodities have historically provided an excellent hedge against inflation with nearly 0% correlation to equities,” Ballin wrote. [ETF Spotlight: Metals and Mining]
PowerShares DB Base Metals (NYSEArca: DBB) gives investors exposure to aluminum, copper and zinc spot prices. It was down more than 2% on Thursday on the fresh Eurozone jitters. Base metals are sensitive to cycles and industrial activity.
The iPath Dow Jones-UBS Copper ETN (NYSEArca: JJC) fell nearly 3%. The ETF has hit resistance at its 50-day moving average. [Copper ETFs In Biggest Rally Since March 2009]
iPath Dow Jones-UBS Copper ETN
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.