Metal ETF

By: EconomyWatch   Date: 3 August 2009

About The Author

EconomyWatch

The core Content Team our economy, industry, investing and personal finance reference articles.

EconomyWatch, Content Team

 

  • Dot Div
  •      

A metal ETF invests in companies that are related with the mining, processing and production of metals and may also invest in raw metals. Metal ETFs are popular because of the spiraling demand for steel for industrial use.

 

Rise in the Value of Metal ETFs and Steel
 

Steel laid the foundation of the industrial revolution. The real boom in steel production came after the renaissance when more durable and wieldable steel was invented. Since then, steel has been preferred to other metals for its durability and economy. Today it finds use in various industries like:

  • Construction

  • Ships

  • Automobiles

  • Machines

  • Appliances

  • Home-ware

 

Emerging markets, like China, Brazil and India, have huge demand for steel and the rising value of the metal is a clear indication of this. Companies, like ArcelorMittal and Shagang Group, are among the biggest steel producers.

 

Growth in the demand for steel has created demand for other metals, like copper and iron. Companies are experimenting with different compositions to devise new cost effective, lighter yet stronger versions of these metals to take advantage of the situation.

 

With a huge variety among these metals, new ‘standard’ organizations have come into existence, which certify the purity and characteristics of these metals.

 

The Two Sides of Metal ETFs

In a sound economic situation, the demand from emerging markets remains at elevated levels and the price of metal ETFs keep rising. However, during recession, when the global economy struggles, both demand and price dip significantly. Thus, investing in metal ETFs does represent huge potential, albeit during stable times. Economical turbulence can result in more losses than with other consumer products.

 

Also, by investing in metal ETFs, a trader only becomes a partial owner of the metals. Metals lie with trusts or in security vaults. Thus, the transaction fee of these metal ETFs is slightly higher than other commodity ETFs.

 

Popular Metal ETFs
 

Steel ETFs are clearly the hot favorite among metal ETFs (apart from precious metal ETFs). Some of the popular ones are:

·        Market Vectors Steel ETF (SLX)

·        SPDR S&P Metals and Mining ETF (XME)

·        Claymore S&P/TSX Global Mining ETF (CMW-TSX)

 

As a trader, you should ensure that the metal ETF portfolio includes companies that specialize in steel production and processing.

 

 


  • Dot Div
  •      

Most Popular in Exchange Traded Funds

Related Links
blog comments powered by Disqus