Commodity ETP Weekly – Stimulus helps global economic outlook
• Diversified commodity exposures see month long inflows.
• Agricultural ETP inflows reach 7-week high.
• Seventh consecutive weekly inflow into energy ETPs, led by crude.
• Gold inflows top sector as central banks remain in stimulus mode.
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Diversified commodity exposures see month long inflows. ETPs with a diversified exposure to the commodities market as a whole have experienced a month-long run of inflows, totalling US$52mn over the period. The trend signifies that investor sentiment appears to be turning for commodities, the worst performing sector over the past four years. Investors are also increasing exposure to basket ETPs in each sector, with ETFS Agriculture (AIGA), ETFS Industrial metals (AIGI) and ETFS Energy (AIGE) all receiving inflows last week.
Agricultural ETP inflows reach 7-week high. ETFS Agriculture (AIGA) received the highest inflows in 10 weeks. AGRI inflows totalling US$5.7mn topped the agricultural sector, closely followed by the US$5.1mn inflows into coffee ETPs. Coffee inflows reached a 16-week high, as a plunge in coffee prices has attracted bargainhunters to the commodity. Overdue rainfall in Brazil sent prices over 10% lower last week, as expectations for a better crop rose.
Seventh consecutive weekly inflow into energy ETPs, led by crude. The energy sector has experienced one week of outflows over the past four months, with inflows totalling over US$550mn since late July. Oil prices declined last week, after the Energy Information Administration reported a large jump in inventory levels, more than double market expectations. Both WTI and Brent crude have dropped by over 10% since the recent early October peak. While this was the fourth consecutive weekly stock build, rig counts have been falling for the past eight weeks, giving investors’ confidence that the oil price is forming a bottom. Moreover, demand, particularly from China is seemingly robust, offsetting some concern of a sharp slowdown in the world’s second largest economy.
Gold inflows top sector as central banks remain in stimulus mode. The gold price has remained relatively resilient last week, retaining its gains over the past month as lingering concern stemming from recently softer global economic data is coupled with an increasing desire by central banks to be proactive in terms of monetary support. The European central bank appears keen to do more to offset what it sees as ‘downside risks’ to the economy, and additional stimulus raises the potential for further currency debasement, a supportive influence for monetary metals, particularly gold.
Key events to watch this week. After China and the ECB set the stage for greater central bank accommodation, such trends are likely to be positive for metals demand, particularly precious metals. Nevertheless, precious metals gains are likely to be capped, with the US Dollar strengthening after the ECB meeting last week. This week’s FOMC meeting will give clarity on future policy direction, and while we expect the FOMC to hike rates this year, it is unlikely to be this week.
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ETF Securities Research team
ETF Securities (UK) Limited
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E info@etfsecurities.com
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