Why Aluminum ETF Is a Terrible Idea
Friday, May 14th, 2010Michael Johnston submits:
Citigroup made news this week when an analyst from the bank noted that the launch of a physically-backed aluminum ETF could cause a spike in the metal’s price. David Thurtell, an analyst in London, told Bloomberg that the launch of a physically-backed aluminum ETF could send aluminum prices higher by as much as 24%. Following the tremendous success of physically-backed platinum (PPLT) and palladium (PALL) ETFs launched earlier this year, speculation has turned to other widely-used metals that could be offered in ETF form.
With interest in commodities as an asset class on the rise, ETF issuers are investigating ways to offer investors exposure to spot commodity prices. Aluminum is one of the most widely-used metals in the world, found in everything from automobiles to packaging. Its widespread use and correlation to industrial activity makes aluminum potentially attractive for a variety of investment uses, including as an inflation hedge or bet on a sustained economic recovery.
