• 5 hours Permian Still Holds 60-70 Billion Barrels Of Recoverable Oil
  • 10 hours Petrobras Creditors Agree To $6.22 Billion Debt Swap
  • 14 hours Cracks Emerge In OPEC-Russia Oil Output Cut Pact
  • 18 hours Iran Calls On OPEC To Sway Libya, Nigeria To Join Cut
  • 20 hours Chevron To Invest $4B In Permian Production
  • 21 hours U.S.-Backed Forces Retake Syrian Conoco Gas Plant From ISIS
  • 23 hours Iraq Says Shell May Not Quit Majnoon Oilfield
  • 3 days Nigerian Oil Output Below 1.8 Million BPD Quota
  • 4 days Colorado Landfills Contain Radioactive Substances From Oil Sector
  • 4 days Phillips 66 Partners To Buy Phillips 66 Assets In $2.4B Deal
  • 4 days Japan Court Slams Tepco With Fukushima Damages Bill
  • 4 days Oil Spills From Pipeline After Syria Army Retakes Oil Field From ISIS
  • 4 days Total Joins Chevron In Gulf Of Mexico Development
  • 4 days Goldman Chief Urges Riyadh To Get Vision 2030 Going
  • 4 days OPEC Talks End Without Recommendation On Output Cut Extension
  • 4 days Jamaican Refinery Expansion Stalls Due To Venezuela’s Financial Woes
  • 4 days India In Talks to Acquire 20 Percent Of UAE Oilfield
  • 5 days The Real Cause Of Peak Gasoline Demand
  • 5 days Hundreds Of Vertical Oil Wells Damaged By Horizontal Fracking
  • 5 days Oil Exempt In Fresh Sanctions On North Korea
  • 5 days Sudan, South Sudan Sign Deal To Boost Oil Output
  • 5 days Peruvian Villagers Shut Down 50 Oil Wells In Protest
  • 5 days Bay Area Sues Big Oil For Billions
  • 5 days Lukoil Looks To Sell Italian Refinery As Crimea Sanctions Intensify
  • 5 days Kurdistan’s Biggest Source Of Oil Funds
  • 6 days Oil Prices On Track For Largest Q3 Gain Since 2004
  • 6 days Reliance Plans To Boost Capacity Of World’s Biggest Oil Refinery
  • 6 days Saudi Aramco May Unveil Financials In Early 2018
  • 6 days Has The EIA Been Overestimating Oil Production?
  • 6 days Taiwan Cuts Off Fossil Fuels To North Korea
  • 6 days Clash In Oil-Rich South Sudan Region Kills At Least 25
  • 6 days Lebanon Passes Oil Taxation Law Ahead Of First Licensing Auction
  • 7 days India’s Oil Majors To Lift Borrowing To Cover Dividends, Capex
  • 7 days Gulf Keystone Plans Further Oil Output Increase In Kurdistan
  • 7 days Venezuela’s Crisis Deepens As Hurricane Approaches
  • 7 days Tension Rises In Oil-Rich Kurdistan
  • 7 days Petrobras To Issue $2B New Bonds, Exchange Shorter-Term Debt
  • 7 days Kuwait Faces New Oil Leak Near Ras al-Zour
  • 8 days Sonatrach Aims To Reform Algiers Energy Laws
  • 8 days Vitol Ups Cash-for-Oil Deals With Kazakhstan To $5B
Alt Text

Supervolcanoes Could Drive The Electric Car Boom

Supervolcanoes could hold the key…

Alt Text

Chinese Environmental Crackdown Could Lift Commodity Prices

A Chinese environmental crackdown could…

Alt Text

The Mining Sector In This Troubled Nation Just Collapsed

Tanzania’s crackdown on the mining…

Taras Berezowsky

Taras Berezowsky

Taras is a writer for MetalMiner who operate the largest metals-related media site in the US according to third party ranking sites. With a preemptive…

More Info

Base Metal ETF's and the Commodity Boom

Figuring out the best investment plays on the recent commodity boom we’ve been seeing isn’t an open and shut case. There are many different factors to consider; apart from the “what” (what metals should I be investing in?), the “why” (are metals a safe bet with all the volatility surrounding them?) is just as important. Think of the “tail” risks, as some analysts call them, that the world has on its plate right now: first the massive European credit downgrades of the national economies of Greece/Portugal/Ireland etc., then the domino effect of Middle Eastern revolt, then the horrific quake and tsunami in Japan. This triple whammy definitely opens the door to an unforeseen “fog of uncertainty,” said ETF Securities senior analyst Daniel Wills in a conference call last Thursday.

Due to volatility inherent in supply disruptions and political unrest, what could mean high prices and higher yields for some could mean headaches for others. Over the past 10 years, commodities as an asset class have consistently yielded more positive returns than real estate, equities or cash. If industrial supply tightens, base metal prices will continue rising. But how much do physically backed metal ETFs have to do with supply constriction?

In following the base metal ETF front for a few months, it appears to us as though the inflows/outflows of physical metal are not overwhelmingly factoring into the global demand and supply equation. Consider the graph below, courtesy of ETF Securities:

Precious Metals 2010
Source: ETF Securities

Although industrial metals ETFs have seen increasing dollar inflows over the past four months, the proportion of metals ETFs to the rest (for example, oil and food) is rather marginal. (The graph takes gold ETPs out of consideration, which account for a vast majority of ETF dollar inflows.) From this, can we infer that physical base metals don’t play a meaty part in the supply landscape?

Not necessarily. Although base metal ETF warehouses might be stocking a relatively small chunk of the physical metals on the market, the trend of rising inflows may speak volumes of what speculators, investors and buyers are doing – getting their hands on ever scarcer materials sooner rather than later. This is especially true for emerging markets, which are eating up copper, aluminum, nickel and iron ore faster than ever. Add in half a nation (Japan) that must rebuild after incurring $235 billion in economic losses, and the appetite for base metals – at least in the short- to medium-term – has grown considerably.

Speaking of Tail Risks…

Instead of using gold as a safe-haven asset in the traditional investment context, Libya’s leaders may need it to continue financing their internationally condemned attacks against their own citizens. The concern is leader Moammar Gadhafi may be using his country’s stash of gold to leverage his war costs by getting it outside Libya’s borders (made illegal in Egypt post-revolution so that leaders couldn’t smuggle their wealth out) in exchange for weapons, food or cash, according to the Financial Times.

The International Monetary Fund estimates that Libya’s Central Bank – which is under Gadhafi’s control – holds 143.8 tons of gold. That translates to roughly $6.5 billion in market value, meaning big bucks that can be used to pay soldiers for a long time.

Gadhafi may have trouble getting anyone to buy or swap for his “conflict gold,” but, interestingly enough, the unrest spurred by his military actions continues inflating the price of the yellow metal – and hence, the value of his ‘personal stash’ – every single day. Should he be able to cash out, the sly fox might be laughing all the way to the bank.

By. Taras Berezowsky

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends, strategies, and trade policies that will impact how you source and/or trade metals and related metals services, MetalMiner provides unique insight, analysis, and tools for buyers, purchasing professionals, and everyone else for whom metals and their related markets matter.




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News