The latest wave of metals exchange traded fund (ETF) launches has sparked concerns about the potential for hoarding of particular base metals. Are they founded?
ETF providers are looking at the prospect of launching more physically-backed ETFs. Now that the precious metals space is well-trod, the attention has shifted to base metals.
But analysts are concerned about base metals becoming replacements for currency, similar to how gold is viewed. The fear is that metals such as copper, nickel, tin, lead, zinc and aluminum will become replacements for currency and that banks and funds will hoard physical stocks as an inflationary hedge, reports Taras Berezowsky for Metal Miner.
Metals like copper and silver are reaching new highs and gold is at non-inflation adjusted records. The prospect of continued rising prices could indeed lead to hoarding. China is already prospecting for mining space in countries such as South Africa, Asia and Latin America to keep their supplies up – just in case investors do hoard certain metals.
This is all speculation at this point. No one can predict how these metals will be treated once funds are available in physically-backed form. Will banks really start to view base metals as better hedges over that old standby, gold? It’s hard to believe, but wait and see. [How Gold ETFs Behave In a Portfolio.]
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.