Precious metal ETCs surge on investors' economy concerns

Investors are increasing their exposure to precious metals, movements in the Exchange Traded Commodities (ETCs) markets suggest.

New figures from ETF Securities, an ETC provider, show net inflows for funds linked to the metals surged by 400 per cent in Q1 2009.

Total precious metals holdings hit £4.5 billion by the end of March - a new record.

ETCs are a type of investment fund which closely track the prices of a particular commodity, such as oil or gold.

A relatively recent innovation, they have proved popular among investors as they can be more easily bought and sold than holdings in the physical commodities themselves.

ETF Securities said that, over the quarter, platinum ETC holdings were up by 82 per cent and those of palladium by 48 per cent.

These moves reflected general rises in the precious metals’ market prices - which rose by 25 and 17 per cent respectively from January to March.

Nicholas Brooks, head of research and investment strategy at ETF Securities, commented: ’The surge of inflows into physically-backed precious metals ETCs in the first quarter is unprecedented and reflects investors’ concerns about current highly uncertain economic and financial conditions.’

He added: ’The security of holding liquid investments that are fully backed by allocated precious metals is a major factor driving these flows.’

ETF Securities also pointed out in its analysis that precious metal-backed investment funds provide a hedge against inflation.

This feature is attractive to investors currently, with central banks including those of the US and UK expanding money supplies through quantitative easing programmes.ADNFCR-2318-ID-19124077-ADNFCR