RE: RE: RE: THIS TIME IT IS DIFFERENTHedge funds could be set to rock the commodities world10/20/2009
Math is more than a little scary
ScotiaMocatta, the Canadian commodities trader and subsidiary of the Bank of Nova Scotia, has asked regulators to approve plans for a fund that would take physical positions in copper.
Credit Suisse Group AG is working with Glencore International AG, the world’s largest trading house, on an exchange-traded fund (ETF) that will be backed by actual aluminum supplies.
And ETF Securities Ltd., a $15 billion U.K.-based firm that makes commodity-investment products available to retail investors, is offering U.S. investors gold-and-silver ETFs that are backed by the precious metals stored in vaults, instead of the more-conventional financial futures contracts.
ETF Securities is now also considering a U.S. oil fund that’s tied to swap contracts with a member of Big Oil. It already has such an arrangement with Royal Dutch Shell PLC in Great Britain.
Hedge funds and other institutional investors that invest in commodities are beginning to demand physical delivery – and not just futures contracts, the Financial Times reported last week.
Institutional investors are making these moves in order to sidestep expected regulatory changes. But with gold at near-record levels, and other commodity prices advancing, too, a major migration to the physical commodities market will translate into an actual jump in physical commodities demand.
Such a shift will push up commodity prices – and it has the potential to rev up inflation and cause major economic disruptions.