Physical Commodity ETFs Bloom

NEW YORK (TheStreet) -- The demand for "physical" commodity ETFs is exploding worldwide.

International fund issuer ETF Securities saw the biggest ever one-day influx of assets into ETFS Physical Gold ETC(PHAU.L Quote) Tuesday in London. This ETC's bullion holdings increased by 7 percent Tuesday, or 211,500 ounces, to 3.190 million ounces.

In the U.S., investors use funds like SPDR Gold Shares(GLD Quote) and iShares COMEX Gold Trust(IAU Quote) to diversify and hedge against inflation.

Like other "physical" ETFs, GLD and IAU allow investors to gain exposure to the market for physical gold. Each has gold bullion to back its shares. The success of the ETF is dependent on how much people want to pay for physical gold.

ETF Securities has popularized these commodity funds abroad. The issuer launched five new funds on the Tokyo Stock Exchange earlier this week. The new ETFs are Physical Gold, Physical Silver, Physical Platinum, Physical Palladium and a Physical PM Basket ETF.

ETF Securities has also ventured into the U.S. market. On July 24, ETF Securities premiered the ETFS Silver Trust(SIVR Quote) on the NYSE, offering investors exposure to physical silver. SIVR has yet to attract high volume, but is certainly a symbol to watch.

While hard data has yet to back rampant inflation fears, investors continue to protect their portfolio with inflation-fighting ETFs. Physical ETFs are popular in the U.S. and abroad while Treasury Inflation Protection Securities(TIP Quote) grow in demand. The iShares TIPs ETF(TIP Quote) is one of the top asset gatherers for the ETF giant in 2009.