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.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

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

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

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!