Metals ETFs Expand Their Family

As emerging economies continue to grow and developed economies mend the wounds from a global financial crisis, the demand for metals has surged.  In fact, some metals are in such high demand that ETF provider First Trust has responded by launching the first equity-based platinum and copper exchange traded funds.

Demand for copper and platinum is especially high due to their industrial and manufacturing uses, their ability to enable investors to gain exposure to foreign markets and their ability to enable investors to hedge positions against the U.S. dollar.

Copper is heavily used in construction with its capability as an excellent conductor of electricity and because it corrodes slowly.  Additionally, copper is an important ingredient in many alloy metals and is typically included in finishings that involve brass, German silver and sterling silver.

As for platinum, it’s commonly used in automotive catalytic converters, which control emissions.  Additionally, platinum is used in the medical research industry and is often a sought after metal in fine jewelry. 

The outlook for both metals remains bright and can be played directly through these new ETFs which include:

  • First Trust ISE Global Copper (CU) which tracks companies directly involved in various aspects of copper mining, refining or exploration.  CU carries an expense ratio of 0.70% and enables investors to gain access to Canada, the United Kingdom and Peru.
  • First Trust ISE Global Platinum (PLTM) which holds companies who are linked to the platinum and palladium industries.  PLTM carries an expense ratio of 0.70% and provides exposure to South Africa, Canada and the United Kingdom.

In addition to these new ETFs, one can play these metals through the following exchange traded notes (ETNs):

  • iPath DJ UBS Copper (JJC), which carries an expense ratio of 0.75%.
  • iPath DJ UBS Platinum (PGM), which carries an expense ratio of 0.75%.
  • UBS E-TRACS Long Platinum (PTM), which carries an expense ratio of 0.65%.

Keep in mind that ETNs are a little different than traditional ETFs, in that they are debt instruments and carry the risk that the issuer could potentially default.