Gold ETPs founder stymied on copper


Prices Higher

Plans to create U.S. ETPs backed by industrial metals are opposed by some consumers. Vandenberg & Feliu LLP, representing an unidentified group of U.S. fabricators and a merchant company, wrote to the SEC in May to object to JPMorgan Chase & Co.’s plan for a copper-backed ETP.

The product will cause prices to rise, “which will severely disrupt the world market for the trading of such copper,” the New York-based law firm said in the letter. The group includes Southwire Co., a wire and cable manufacturer based in Carrollton, Georgia, according to an SEC document dated May 14.

Florence Harmon, an SEC spokeswoman, declined to comment.

The market for ETPs exploded in the past decade by offering investors access to almost all asset classes in a security that could be traded like a stock and with fees that undercut most mutual and hedge funds. While one gold contract on the Comex exchange in New York costs more than $160,000, ETF Securities’ ETP can be bought for about $160 a share. There were 4,650 ETFs and ETPs with assets of $1.62 trillion by the end of May, up from 105 holding $79 billion in 2000, according to ETFGI.

Behind Gold

ETF Securities already has London-listed ETPs backed by aluminum, lead, zinc, tin and nickel stored in warehouses. Holdings across the products have so far lagged behind gold, with none of their market capitalizations exceeding $3.2 million. They will grow as more investors discover them and financial advisers recommend them, Tuckwell said.

“The intermediaries, I think, is where the missing piece is,” Tuckwell said in interviews in March and on June 19. “You get this conflict between mutual funds or the asset managers and the ETFs, because we’re basically eating their lunch. The money’s flowing toward us, and will naturally flow toward us because it’s cheaper, more efficient and more transparent.”

Tuckwell, 55, has overcome objections before. The Canberra, Australia-born entrepreneur was undeterred in 2002 when the Australian Gold Council rejected his plan for gold ETPs modeled on existing securities backed by cases of wine. Investors were trading particular vintages and he proposed treating gold bars in vaults like bottles in cellars.

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