Investors Still Bullish on Gold and Copper

By Commodities Now

According to a June 2011 survey by ETF Securities, 90% of European investors have increased their holdings in precious metals over the past five years - this has mostly been driven by concerns on sovereign debt and inflation.

Two-thirds of investors expect the price of gold to increase over the next 12 months and over half expect the price of copper to increase over the same period. These are the results of ETF Securities' (ETFS) pan-European client survey* , focusing on metals.

Key findings of the ETFS client survey include:

• The majority of investors expect to increase their allocation to both precious and industrial metals over the next five years, with copper and gold being the most popular choices.
• In continental Europe, investors cite inflation hedging and portfolio diversification as the key benefits of investing in industrial metals. However, in the UK, most investors (60% of respondents) cite the strong links to the macroeconomic cycle as the main reason for maintaining exposure to industrial metals.
• Inflation hedging and portfolio diversification are seen as the key benefits of precious metals investing, according to the survey's respondents.
• Investors are still undecided on the outlook for silver, with 44% of respondents expecting the price to increase over the next 12 months.
• Almost half of the respondents prefer to invest in precious metals through physically-backed ETPs versus other methods of investment, including buying the metals directly.
• Gold, oil and agriculture are the current top commodity picks for investors.

Commenting, Scott Thompson, Co-Head of European Sales at ETF Securities, said: "Whether for inflation-hedging or portfolio-diversification purposes, enthusiasm for precious metals investment shows little sign of abating among survey respondents. Demand for gold remains particularly strong. Yet respondents are also keen to increase their exposures to industrial metals for similar reasons.

Many respondents also perceive the correlation between industrial metals and the macroeconomic cycle to be significant. Interestingly, more than half of respondents (56%) expect to increase their allocations to industrial metals over the next five years. Industrial metals currently account for just 5% of assets in commodity ETPs globally; today's survey results suggest this figure could be set to rise."

(The survey was taken at an annual pan-European conference held by ETF Securities during the week of 14th June 2011 where delegates were asked to take part in a survey. In total, 54 responded. Responses across Europe were consistent; little bias was evident between countries.)

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