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WisdomTree Launches new European commodity ETF for investors to hedge against inflation

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(Kitco News) - European Investors have a new way to hedge against the growing inflation risk as WisdomTree launches a new broad-based commodity exchange-traded ETF.

The U.K.-based investment firm announced Monday that its WisdomTree Broad Commodities UCITS ETF (PCOM) has started trading on the London Stock Exchange and Börse Xetra. The company said that PCOM will track performance of the Bloomberg Commodity Total Return Index, which covers four broad commodity sectors: energy, agriculture, industrial metals, and precious metals.

Nitesh Shah, head of commodities and macroeconomic research for the firm's European funds, said that commodities remain an attractive investment and hedge against inflation.

"Inflation in the US and Europe is running at the highest levels in over a decade, mainly driven by supply-side shocks, which commodities are uniquely positioned to protect against. Energy price spikes, drought-induced food price increases and transit bottlenecks, for example, feed directly into commodity prices and the consumption baskets that inflation figures are calculated from," he said in a prepared statement. "It's not just these short-term phenomena that are driving commodity prices. An infrastructure renaissance combined with an energy transition could drive a super-cycle in certain commodities for the coming decade."

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The company said the new fund is exposed to precious metal through physical replication of gold and silver. At the same time total return swaps are used to deliver the performance for the energy, agriculture, and industrial metals components.

WisdomTree is becoming fairly bullish on commodities, including gold and silver. In a recent interview with Kitco News, Jeff Weniger, head of equity strategy at WisdomTree said that in 2022 he is recommending investors diversify away from bonds and hold more commodities. He said that a balanced portfolio would be 60% invested in equities, 30% in bonds and 10% in commodities.

He added that rising inflation pressures will keep the Federal Reseve behind the inflation curve, which will support commodity prices next year.

"Let's suppose it is the case or that there are even four rate hikes next year. That doesn't preclude commodities from rallying," he said. If you have your money at something like 1% and inflation is running at 3% or 4%, that is still extremely accommodated monetary policy."

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