Trader Dan: Dow Jones/UBS Commodities Index Change to Benefit the Precious Metals

[pmbug]

Every year, the various commodity indices, that are used by hedge funds and index funds to benchmark against, have a reweighting of the various commodity inputs that are used to comprise each particular index. During this reweighting process, the percentage of some commodities are increased while the percentage of others are decreased. As a result, those funds benchmarking against the index, are forced to recalibrate their particular portfolios, selling some commodity positions while buying some new commodity positions in order to come into alignment with the new weightings.

Dow Jones/UBS recently announced that the precious metal component of their index will be increased by 2% from this year's levels for 2013. This will benefit gold and silver to the extent of an estimated (by Credit Suisse analysts) to the tune of some $1.6 Billion in new money flows. The money will be evenly split between gold and silver.
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More: http://traderdannorcini.blogspot.co.uk/2012/10/dow-jonesubs-commodities-index-change.html

 

[benjamen]

If it is well known that a change of the index mix will cause massive selloffs or purchases, who is in control of these changes?
:shrug:

 

[swissaustrian]

If it is well known that a change of the index mix will cause massive selloffs or purchases, who is in control of these changes?
:shrug:

It's a private index controlled by UBS.