After two years waiting for approval, the debated JPMorgan’s XF Physical Copper Trust fund has got the green light from the U.S. Securities and Exchange Commission (SEC).
The resolution, dated December 14 and posted on the SEC website on Monday, makes it easier for the bank to launch its product, which has been criticized by U.S. politicians and copper producers since its inception.
Originally scheduled to rule on the matter on Oct. 17, the SEC decided to postpone the ruling on the proposed copper exchange fund until now, saying it needed more time to consider all the facts arisen in various comment letters received.
Gold ETFs have been very supportive of the price and combined these funds now hold almost 2,500 tonnes of the precious metal, but given copper’s essential role in the global economy investors hoarding physical supply will have a different dynamic altogether.
According to Mickey Fulp, author of The Mercenary Geologist, since 30% of the copper stored in warehouses is not available to the market prices might skyrocket.
“The real concern here is that physical ETFs for industrial metals could be disastrous for the supply-demand fundamentals of the market. I personally do not think that this ETF is going to come about. If it does, then we will have even more manipulation of the copper market than at present. I don’t think that would be good for a healthy supply-demand balance,” he said last month.
Earlier in the year an entity took control of up to 90% of cash contracts and inventories on the LME . Stock levels at the LME’s 600 warehouses around the world are at historically low levels of 250,00 tonnes – down from 450,00o tonnes a year ago. 73,500 tonnes are also held in COMEX warehouses.
Asset management firm BlackRock Inc. (NYSE:BLK) and ETF Securities Ltd. have also said they plan to start physically backed ETFs for industrial metals in the U.S.
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