Money pours into ‘metal commodities ETFs’ for gold, silver and copper despite choppy markets

Major ETFs investing in gold and silver

More than KRW 500 billion each has flowed in

Uptrend driven by demand growth outpacing supply

Countries increasing gold holdings as a safe asset

Commodity prices expected to rise over the medium to long term

Dip buying likely on any pullback

Money is flowing into exchange-traded funds (ETFs) that invest in gold, silver and copper. Despite recent sharp swings, experts expect commodity prices to remain on a medium- to long-term uptrend.

Net inflows of roughly KRW 500 billion into gold and silver ETFs

According to Koscom’s ETF Check on the 4th, major ETFs investing in gold, silver and copper each drew around KRW 100 billion in inflows last month. ‘KODEX Silver Futures (H)’ saw net inflows of KRW 551.8 billion, while ‘ACE KRX Physical Gold’ recorded KRW 535.2 billion. That is more than triple the net inflows (KRW 165.9 billion) over the same period into ‘TIGER Semiconductor TOP10,’ which invests in leading chipmakers such as Samsung Electronics and SK hynix. Among copper ETFs, the largest by net assets, ‘TIGER Physical Copper,’ attracted KRW 121.1 billion.

These ETFs pulled in investment money as the underlying commodity prices continued to surge. According to the Commodity Exchange (COMEX) in New York, U.S., international gold futures traded at USD 5,210.1 per troy ounce (31.1035g) on the 30th of last month, up about 20% over the past month. Over the same period, silver futures rose about 45% and copper futures about 6%. ‘HANARO Global Gold Mining Companies,’ which delivers returns in line with the rally in global miners, saw net inflows of KRW 42.5 billion. The ETF returned about 20% year-to-date through the 29th of last month, with net assets topping KRW 130 billion.

Prices jump as investment demand surges

Gold, silver and copper prices climbed sharply as demand increased significantly relative to supply. For years, central banks have been building their gold reserves to reduce reliance on the dollar and secure safe assets. Private investment flows, wary of inflation and geopolitical uncertainty, are also buying gold and silver. Some buy physical products such as coins or gold and silver bars, but as ETF investing has become more common, the number of investors gaining exposure to these commodities via ETFs has surged. As ETF demand rises, asset managers also increase the amount of physical metals they purchase and store.

According to the World Gold Council (WGC), global gold ETFs’ holdings increased by 222 tonnes year-on-year in the third quarter of last year alone—roughly comparable to central banks’ gold purchases over the same period. Industrial demand is also rising sharply for silver and copper. Silver is used in various electronic circuit boards, with roughly 50% of global demand coming from industry. Copper, for which industrial demand accounts for as much as 85%, is an essential material for next-generation industries—used in products such as wiring and battery packs—as well as in defense products such as cartridge cases. These are areas where demand is hard to cut sharply even when prices rise.

“Dip-buying flows likely after a short-term pullback”

Gold and silver prices underwent a steep correction late last month, driven by uncertainty over the U.S. Federal Reserve’s rate stance, additional margin requirement hikes at international exchanges, and profit-taking after a sharp run-up. However, experts say these commodity prices are likely to extend their medium- to long-term uptrend on the back of investment and industrial demand. Hwang Byung-jin, a researcher at NH Investment & Securities, said “short-term issues do not undermine gold’s intrinsic role,” adding that “as major countries continue expansionary fiscal policies, gold remains a leading safe-haven asset and an inflation hedge.” Goldman Sachs recently raised the upper end of its gold price target range for this year to USD 5,400 from USD 4,900.

Choi Jin-young, a researcher at Daishin Securities, said “if gold and silver prices correct, there is a strong possibility that emerging-market central banks will step in to buy on dips,” adding that “this would ease market jitters.” Ok Ji-hoe, a researcher at Samsung Futures, forecast that “whether the U.S. will impose refined copper tariffs, which it has put on hold for now, will be decided by June,” adding that “until then, prices could rise on uncertainty and supply disruptions.”

By Sun Han-gyeol always@hankyung.com