Gold ETFs drive passive commodity turnover in 2011, says study

Commodity ETFs including gold had the second highest proportional asset growth in Europe last year, fed by perhaps the only certainty in the global economic climate these days – that there will be more money printing at some stage.

Commodities ETFs showed the highest growth in turnover – 1.82% growth – to represent 14.4% of all trading. This is strong growth, considering commodity ETF trading represented just 4.5% of total turnover in 2006.

Gold seemed to be passive investors’ main target in 2011, according to analysis of the industry by Lyxor ETFs, a wholly owned subsidiary of Societe Generale.

Turnover of precious metal ETFs increased by 8.4%, whereas turnover in every other commodity ETF sector (agriculture, energy, industrial metals) fell. Within the commodities complex, precious metals ETFs represented over two thirds of total turnover.

Based on assets, commodity ETFs grew their market share by 2%, to 15% of Europe’s whole ETF market.

By the end of last year commodities ETFs held €97bn, compared to €66.5bn the year before.

Commodities products were still in the shadow of equities ETFs, which held €385bn and were 58% of the total European ETF market assets.

What was evident at the industry level was also reflected at individual providers.

For example, trading volume in the Source Physical Gold ETF increased by 400% in 2011, and the product passed $2.3bn.

The average bid/offer spread on the product fell below 10bps on the London Stock Exchange, according to the firm.


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