SEC Division Study Says No Link Between Metal ETFs, Prices

ETF Trends

A Securities and Exchange Commission division’s analysis of exchange traded products that hold physical metals found the products don’t have an impact on the commodities’ prices.

A study conducted by the SEC’s Staff of the Division of Risk, Strategy, and Financial Innovation “found no clear evidence of statistical causality between the historical flow of assets to physical metals ETPs and underlying commodity prices of those metals,” according to a filing.

The SEC was examining the potential effects of physical copper ETFs proposed by JP Morgan (JPM) and BlackRock’s (BLK) iShares.

The study examined existing ETFs backed by gold, silver, platinum, and palladium.

The analysis from the SEC’s Division of Risk, Strategy, and Financial Innovation also found that there is not a strong statistical relationship between copper inventories and copper prices, according to the filing.

Reports last month said the SEC had pushed back the deadline for a ruling on JP Morgan’s planned copper ETF, citing more time needed to go over the consequences of a physically-backed copper fund on metal flow and prices. [SEC Holds Off on Physically Backed Copper ETFs]

End users of copper are afraid ETFs backed by physical metal would boost prices and lead to supply shortages. [Physically-Backed Copper ETFs Still Waiting in the Wings]

“It’s difficult to imagine how the SEC economists could conclude that removing as much as 180,000 metric tons of copper from LME warehouses holding a little more than 200,000 tons globally will have no impact,” said Robert Bernstein, a lawyer at New York-based Vandenberg & Feliu, in a Bloomberg News report. He represents a group of industrial copper consumers.

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