The Securities and Exchange Commission has yet to approve plans for exchange traded funds backed by physical copper amid concerns the products could squeeze demand and push prices higher.
JP Morgan, BlackRock and ETF Securities have all filed to launch physical copper products. [Getting Physical with Copper ETFs]
“The new products are opposed by some consumers concerned they will cause shortages of materials used in everything from cables to cars, while the U.S. Commodity Futures Trading Commission is trying to limit speculation,” Bloomberg News reports.
JP Morgan’s planned copper ETF has run into opposition from producers and traders. [JP Morgan’s Planned Copper ETF Draws Heat]
“As you move away from the typical investment products to things that would be viewed to be more usable commodities, regulators become more concerned,” said Deborah Fuhr, a co- founder of research group ETFGI, in the report.
Copper ETFs have fallen sharply the past two months on the Eurozone debt crisis and fears China’s economy is slowing. Copper prices are seen as a leading indicator for the global economy. [Copper ETFs Slump on China Slowdown Fears]
Dave Nadig, the director of research at IndexUniverse, told Bloomberg the challenge of physical copper ETFs is clear-cut. “I can hold a million dollars worth of gold in my hand, but I would have to stack aluminum up as high as my house to get a million dollars,” he said.
Existing copper ETFs are based on copper futures contracts or shares of commodity producers.
iPath Dow Jones UBS-Copper Total Return ETN