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Credit crisis spurs record-shattering day for exchange-traded commodities


ETF Securities saw record inflows to its exchange-traded commodities platform on July 15, with precious metals, agriculture, industrial metals and leveraged ETCs enjoying the largest capit

ETF Securities saw record inflows to its exchange-traded commodities platform on July 15, with precious metals, agriculture, industrial metals and leveraged ETCs enjoying the largest capital flows.

Gold was the most popular ETC with some USD265m in inflows but even ETFS Agriculture bucked a recent trend by adding USD50m. Excluding the recent acquisition of Gold Bullion Securities, ETF Securities’ total assets have grown by USD1.7bn or 30 per cent in the past 11 weeks to USD6.6bn, with the five physical precious metals contributing more than 50 per cent to reach a record USD2.7bn.

Safe haven buying saw ETF Securities’ precious metals platform experience huge demand, contributing 75 per cent of net inflows on July 15. Gold ETCs recorded USD225m in trading on the London Stock Exchange, which also reported that gold products accounted for two of the top four products by trading volume in June on its ETC/ETF platform. Gold ETCs traded USD1.3bn, of which the two physically-backed gold ETCs accounted for USD1.2bn.

ETFS Short Crude Oil was the second most heavily traded ETC/ETF in London in June with USD800m. The product is set to break its own monthly trading record again in July, having already traded USD750m in the past 12 sessions in London.

Leveraged ETCs are also proving popular as the cost of credit increases and it becomes harder to obtain. ETFS Leveraged Gold saw inflows of USD82m on July 15, which with two times leverage is equivalent to a USD164m bet on the underlying commodity index. Leveraged ETCs have been the fastest-growing type of ETC over the past 11 weeks with an increase of 400 per cent, bringing total assets from USD50m to USD270m.

ETF Securities now offers more than 120 ETCs that allow investors to implement investment strategies through physical, long, forward, leveraged and short exposure to a wide range of commodity sectors, in three currencies (euros, US dollars and sterling) and listed on five European exchanges, the London Stock Exchange, Euronext Paris, Euronext Amsterdam, Deutsche Börse and Borsa Italiana.

‘We are not surprised that commodities and specifically gold ETCs continue to shatter records for trading volumes and inflows,’ says chief operating officer Nik Bienkowski. ‘ETCs have been designed to be accessible, efficient, liquid and low-cost products for investors.

‘Commodities have been shown to have low correlation to equities, and have also outperformed other asset classes when equity markets have been stressed. Commodities can benefit a diversified portfolio even in the best of times, but there is no doubt that ETCs have benefited from the current state of global equity markets.

‘The demand for leveraged ETCs also shows that the current credit crisis is making capital more expensive. Leveraged ETCs provide investors double the daily exposure for a management fee of less than 1 per cent. Compared with deposit rates that in some cases exceed 7 per cent, leveraged ETCs are a cost-effective way to gain exposure to commodities.’

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