Metal Miner ETFs May Face CFTC Scrutiny


"The regulation may send would-be investors looking elsewhere."

Over the last few years, commodity ETFs have been watched and scrutinized by regulators. In the wake of an onslaught of new ETFs that give exposure to precious metals, the CFTC might now start taking a look at miners.

There have been a number of new ETFs in recent months that give exposure to the miners of precious and base metals, largely in response to growing demand from investors. TheStreet's Don Dion reports that the popularity of these funds might be taken as a sign that investors are looking to park their cash in areas that won't be affected by financial reform.

The Commodities Futures Trading Commission (CFTC) has used its power to set limits on the number of futures contracts that a single fund can hold to ensure that no one fund holds too much sway over that commodity's price. Now that power may grow.

One part of the Dodd-Frank financial reform bill is legislation that will give the CFTC power to increase regulation of all commodities of "finite" supply. This includes gold and other precious metals.

Many investors are interested in this segment of the market, but the regulation may send would-be investors looking elsewhere while shunning physically backed or futures-based funds. One such area is mining equity ETFs. A few options include:
  • Global X Silver Miners (NYSEArca: SIL)
  • Global X Copper Miners (NYSEArca: COPX)
  • First Trust ISE Global Copper (NASDAQ: CU)
  • Market Vectors Junior Gold Miners (NYSEArca: GDXJ)
  • Market Vectors Gold Miners (NYSEArca: GDX)

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