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1. Effects on stability (Risks Associated with ETF’s)
ETFs that buy and hold commodities or futures of commodities have become popular. For example, SPDR Gold Shares ETF (GLD) has 41 million ounces in trust. [49] The silver ETF, SLV, is also very large. The commodity ETFs are in effect consumers of their target commodities, thereby affecting the price in a spurious fashion. [50] In the words of the IMF, “Some market participants believe the growing popularity of exchange-traded funds (ETFs) may have contributed to equity price appreciation in some emerging economies, and warn that leverage embedded in ETFs could pose financial stability risks if equity prices were to decline for a protracted period.”