One interesting trend that has emerged in 2010 and is likely to remain dominant in the next few years, if not decades, is the growing trend towards financialisation of commodities and the centrality of financial investors in the commodity markets. I have collected some interesting details about the growing importance of financial investors in various commodities
This financialisation of various assets and commodities is an ongoing process as we have highlighted in a previous post. Most often single trader controls a huge chunk of the physical inventory. This now extends to most of the metal markets, especially those traded on the commodity markets. In the copper market, one single trader (stated to be J.P.Morgan) is reported to hold about 80-90 percent of the total LME inventory. Another unidentified trader holds about 90 percent of the LME aluminum inventory. Among the other metals where single traders hold more than fifty percent include Tin, Lead, Zinc and Nickel. Another successful trader, Anthony Ward (often referred to as “Chocfinger”) holds nearly 241,000 tonnes of Cocoa beans that would suffice to make nearly five billion Chocolate bars. The rise of Exchange Traded funds means that financial investors are likely to hold most of the bargaining chips in the commodity markets. This is trend is likely to become more accentuated in 2011. Gold Exchange Traded funds have been particularly successful. The holdings in the largest Gold ETF (that trades under GLD Symbol in US markets) held nearly 1280 tonnes in early December 2010. Its holding of gold exceeded all but five countries of the world.
This financialisation of various assets and commodities is an ongoing process as we have highlighted in a previous post. Most often single trader controls a huge chunk of the physical inventory. This now extends to most of the metal markets, especially those traded on the commodity markets. In the copper market, one single trader (stated to be J.P.Morgan) is reported to hold about 80-90 percent of the total LME inventory. Another unidentified trader holds about 90 percent of the LME aluminum inventory. Among the other metals where single traders hold more than fifty percent include Tin, Lead, Zinc and Nickel. Another successful trader, Anthony Ward (often referred to as “Chocfinger”) holds nearly 241,000 tonnes of Cocoa beans that would suffice to make nearly five billion Chocolate bars. The rise of Exchange Traded funds means that financial investors are likely to hold most of the bargaining chips in the commodity markets. This is trend is likely to become more accentuated in 2011. Gold Exchange Traded funds have been particularly successful. The holdings in the largest Gold ETF (that trades under GLD Symbol in US markets) held nearly 1280 tonnes in early December 2010. Its holding of gold exceeded all but five countries of the world.
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