Physical Copper ETFs? Not So Fast

For more than two years now, issuers like JP Morgan and iShares have been battling to bring physically-backed copper ETFs to the markets. At first glance, it seems like a solid idea; after all, SPDR Gold Trust (NYSEARCA:GLD) and iShares Silver Trust (NYSEARCA:SLV) are two of the most popular ETFs in the world, and each of them offers physical exposure to their respective metals. Yet the proposed copper products remain in the doldrums, as the red tape and roadblocks seem to be endless for these proposed products [for more copper news and analysis subscribe to our free newsletter].

SPDR Gold Trust (ETF) (NYSEARCA:GLD)

A recent SEC study stated that there was little connection between the flows of commodity-based securities and the prices of the commodities themselves. But a copper users group including AmRod Corp, Southwire Co and Encore Wire Corp, have come out against the study. This group, represented by Vandenberg & Feliu, have stated that the proposed funds would disrupt metal supplies as well as increase prices. The group went on to call the SEC study “inaccurate and incomplete” in their opposition to these products.

Problems Continue to Mount

Aside from the backlash against these products, there also comes the question of storage. Physically-backed precious metals products make sense because of the high value-to-weight ratios of these commodities. But storing cheap metals like aluminum and copper could bring in considerable costs for the issuer, leading many to wonder if these products are feasible in the first place [see also For Long-Term Investors: The Cheapest ETF for Every Commodity].

Even if the proposed physically-backed products were able to slash those fees, the effective expense ratio of these proposed products could set new records for the ETF industry. It’s important to keep in mind that storage costs are often a primary reason for contango in futures markets, as longer-dated prices include additional months of storage.

With two years and counting for these products to walk through SEC hoops, it seems more and more likely that they will never see the light of day, at least in their current form. It may just be that physically-backed industrial metals products don’t make sense and investors are better off with futures products. Keep an eye out for any developments on this front, but don’t expect it to be a fast-moving process.

This article was originally written by Jared Cummans, and posted on CommodityHQ.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!