Investors in exchange-traded funds expect gold and copper to yield the strongest returns over the next year.
According to a survey by ETF Securities, 90% of European investors increased their exposure to precious metals over the past five years. This was largely driven by sovereign debt and inflation concerns.
Of the investors surveyed, two-thirds of investors expected the price of gold to increase over the next twelve months and over half expect the price of copper to increase over the same period.
In view of this, investors will be increasing their allocation to precious and industrial metals, with copper and gold being the most popular choices.
ETF Securities said that in continental Europe, investors cited inflation hedging and portfolio diversification as the key benefits of investing in industrial metals.
In the UK, however 60% of respondents said the strong links to the macroeconomic cycle was the main reason for maintaining exposure to industrial metals.
Although overall, the outlook for precious metals was positive, investors were undecided about the price of silver. Of those surveyed, 44% expected the price to increase over the next twelve months.
The firm found that almost half the investors questioned preferred to invest in precious metals through physically-backed exchange-traded products versus other methods of investment, including buying the metals directly. Scott Thompson, co-head of European sales at ETF Securities, said: “Whether for inflation-hedging or portfolio-diversification purposes, enthusiasm for precious metals investment shows little sign of abating among survey respondents. Demand for gold remains particularly strong. Yet respondents are also keen to increase their exposures to industrial metals for similar reasons.
“Many respondents also perceive the correlation between industrial metals and the macroeconomic cycle to be significant. Interestingly, more than half of respondents (56%) expect to increase their allocations to industrial metals over the next five years. Industrial metals currently account for just 5% of assets in commodity ETPs globally; today’s survey results suggest this figure could be set to rise.”
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