2014.07.2202:14:36UTC+00Investors rush to get into metal ETFs

Investors rush to get into metal ETFs

Investors intent to capitalize on rallies are directing money towards exchange traded funds (ETFs) for metals at the fastest pace in five years even as some analysts say gains will be short lived.

Base metals-backed ETFs in the United States have received new investments equal to 18% of their market capitalization in 2014 so far, beating all other commodity groups according to Bloomberg data. Making the most bets for an extended upward climb are hedge funds which have exchanged their belief in a drop for copper earlier this year for an eight year high bullish outlook.

Net long positions for copper futures and options made by money managers marked its fourth consecutive weekly gain last July 15 and was its highest since 2006 at 48,994.

The growth in demand for a variety metals has been spurred by an improvement in the manufacturing and automobile sectors from around the world that raised concerns over diminishing supplies. On the London Metal Exchange, both zinc and nickel have gained 18% since the end of March. Their performance is followed by aluminum which has climbed 13% so far, the 6.5% improvement of lead, and the 5.7% gain of copper.

Goldman Sachs, however, claimed last week that the rally may not last due to the increase in production of mining companies to meet demand. They predict copper dropping 6% to $6,600 per metric ton by year end, but said nickel will surge 17% more from yesterday’s close by the fourth quarter before dropping in 12 months’ time. Citigroup echoed the sentiments, forecasting zinc and aluminum to fall by 4% in the fourth quarter to reverse their “overdone” rally. Macquarie expects copper, zinc, and aluminum to have lower prices as well within three to six months.