Last Updated : 16 December 2010 at 17:05 IST
ETFs to drive up Copper prices to $10,000
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According to the monthly metals report from the global consultancy VM Metals and ABN AMRO, a Netherlands-based bank, investors continue to be bullish on copper, and the ETFs are going to further power the prices of the base metal.
It said while gold and silver bullion continue to lure retail investors, commodity players are turning to copper as a steady investment vehicle and as a hedge mechanism.
Currently, there are several Copper ETFs listed across exchanges in the United States. They include First Trust ISE Global Copper (NASDAQ: CU), Global X Copper Miners ETF (NYSEArca: COPX), iPath DJ-UBS Copper (NYSEArca: JJC).
Several ETFs backed by physical copper are hitting the global markets these days. Copper-backed ETFs have turned out to be the big commodities news recently as many analysts have predicted that they would become bigger than Gold ETFs. Gold ETFs are the biggest exchange traded funds in the world currently.
The front runner for launching Copper ETFs include JPMorgan, Deutsche Bank (NYSE: DB), iShares and ETF Securities. Recently, JPMorgan Chase (NYSE: JPM) traded a massive $1.5 billion in copper on the London Mercantile Exchange.
The VM Metals and ABN AMRO report said that a new physically backed copper exchange-traded product that was launched last week will almost certainly help drive copper prices higher. But the report warned that copper prices will be volatile throughout the year.
“Even tepid investor interest in the new copper ETP will see prices reach more than $10,000 (per metric ton) in 2011,” VM Group and ABN AMRO said. “But the journey will be volatile if the copper-backed ETPs attract short-term bets.”
China will also be affected by the new ETPs, the report said. The country’s imports rose for the time in three months during November, by 29%. However, worries remain with Chinese inflation and money supply, the report said.
The average 2011 three-months copper price forecasts was raised by $210 to $8,833 per metric ton, up from $8,623 in November. The 2010 average is $7,537.
Metal analysts predict that ETFs in copper is going to be another big investment opportunity for commodity players across the world.
“Copper is the most favourite base metals commodity for traders in the world. ETFs in copper will certainly result in bigger investment flows. This will lift the physical stocks of the metal to a higher level,” said David Green, a base metals specialist based in London.
He said Copper ETFs have several advantages over Gold ETFs. “The main advantage is that copper is in a supply deficit situation that is going to continue for some years now. ETFs fit in perfectly in this supply deficit scenario,” he said.
Secondly, the new Copper ETFs are to be based in the United States and traded on the NYSE, the world’s biggest investment market exchange traded funds.
Moreover, the rising demand for copper from markets like China and India would make Copper ETFs the best investment vehicle in the commodities market.
Latest estimate says that China will triple its consumption of copper to 20 million tons by 2020. China will account for 49% of world copper sales by then.
With ETFs getting active, copper price is going to be bullish in the coming months.
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