Etikett: Commodity ETP

Largest inflows into commodity ETP baskets since May 2016

Largest inflows into commodity ETP baskets since May 2016 ETF SecuritiesLargest inflows into commodity ETP baskets since May 2016

ETF Securities Weekly Flows Analysis – Largest inflows into commodity ETP baskets since May 2016

  • Inflows of US$58.5mn into broad commodity ETPs, marks the highest in eight months.
  • Equities have had a strong week with inflows of US$39m. Thematic styles such as Robotics, US small caps and cyber security all saw inflows.
  • Crude oil ETPs see largest outflows in six weeks as investors take profit

Signalling the broad-based interest in commodities, commodity basket ETPs see their highest inflows since May 2016. Following five years of underperformance, commodities made a come-back in 2016. We continue to see interest in diversified commodity baskets as more investors rotate toward the asset class.

Equities have had a strong week with inflows of US$39m. Thematic styles such as Robotics, US small caps and cyber security all saw inflows whilst Australian equities saw US$12.6m inflows. That came despite world equities seeing a decline in performance over the week, suggesting investors are searching for alternative investment styles as valuations rise. Investors are getting noticeably more bearish on broad equities. For example we saw US$16m inflows into short European Stoxx 50 equities and US$15m of outflows in long positions. In terms of thematics, Robotics particularly remain in favour with year-to-date inflows totalling US$50m.

The rout in precious metal that begun after the US presidential election now looks to be over, with inflows into gold of US$59.6m over the last week and US$96.6 since the beginning of the year. Recent payroll figures suggest a mixed employment picture. The FOMC implied that a March rate hike, whilst being data dependent, was unlikely, with a persistence of negative real interest rates most likely in our view.

Crude oil ETPs see largest outflows in six weeks. Outflows from long crude oil ETPs of US$42.1mn followed a 7% rally in oil prices last week as investors took profit. While OPEC is one month into its 6-month production cut, the US continues to increase production. US inventory is rising as more oil rigs come into operation every week in the in the US.

Industrial metals basket ETPs see seven consecutive weeks of inflows. Inflows into industrial metal baskets totalled US$12.9mn. Against the odds, most industrial metals continue to rise. Last week’s surprise announcement from the Philippines that it will close 23 nickel mines sent the price of the metal soaring by 8%.

Largest outflow from long Yen ETPs since September 2015. Investors appear concerned that Yen weakness is here to stay, after divesting funds in ETPs tracking long EUR/JPY positions at the fastest rate since inception(2012), totalling US$4.8mn last week. With inflation expectations rising in Europe, and as the ECB is nearing the limit of its QE activities as it is expected to taper its asset purchase programme toward year-end, the Euro should benefit.

For more information contact

ETF Securities Research team ETF Securities (UK) Limited T +44 (0) 207 448 4336 E info@etfsecurities.com

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This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).

This communication is only targeted at qualified or professional investors.

The products discussed in this communication are issued by ETFS Commodity Securities Limited (”CSL”), ETFS Hedged Commodity Securities Limited (”HCSL”), ETFS Hedged Metal Securities Limited (”HMSL”), Swiss Commodity Securities Limited (”SCSL”), ETFS Foreign Exchange Limited (”FXL”), ETFS Metal Securities Limited (”MSL”), ETFS Oil Securities Limited (”OSL”), ETFS Equity Securities Limited (”ESL”), Gold Bullion Securities Limited (”GBS” and, together with CSL, HCSL, HMSL, SCSL, FXL, MSL, OSL and ESL, the ”Issuers”) and GO UCITS ETF Solutions Plc (the ”Company ”). Each Issuer (apart from SCSL) is regulated by the Jersey Financial Services Commission. The Company is an open-ended investment company with variable capital having segregated liability between its sub-funds (each a ”Fund”) and is organised under the laws of Ireland. The Company is regulated, and has been authorised as a UCITS by the Central Bank of Ireland (the ”Financial Regulator”) pursuant to the European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations, 2003 (as amended). Italy: When being made within Italy, this communication is for the exclusive use of the ”qualified investors” and its circulation among the public is prohibited. Switzerland: In Switzerland, this communication is only intended for Regulated Qualified Investors. US: This communication is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof, where none of the Issuers, the Company or any securities issued by them are authorised or registered for distribution and where no prospectus for any of the Issuers or the Company has been filed with any securities commission or regulatory authority. Neither this communication nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States. Neither the Issuers, the Company nor any securities issued by them have been or will be registered under the United States Securities Act of 1933 or the Investment Company Act of 1940 or qualified under any applicable state securities statutes. This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. ETFS UK does not warrant or guarantee the accuracy or correctness of any information contained herein and any opinions related to product or market activity may change. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Any historical performance included in this communication may be based on back testing. Back tested performance is purely hypothetical and is provided in this communication solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Historical performance is not an indication of or a guide to future performance. The information contained in this communication is neither an offer for sale nor a solicitation of an offer to buy securities nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchaser or sale would be unlawful under the securities law of such jurisdiction. This communication should not be used as the basis for any investment decision. ETFS UK is required by the FCA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

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Securities issued by the Issuers and the Company may be structured products involving a significant degree of risk and may not be suitable for all types of investor. This communication is aimed at sophisticated, professional and institutional investors. Any decision to invest should be based on the information contained in the prospectus (and any supplements thereto) of the relevant Issuer or the Company which includes, inter alia, information on certain risks associated with an investment. The price of any securities may go up or down and an investor may not get back the amount invested. Securities may be priced in US Dollars, Euros, or Sterling, and the value of the investment in other currencies will be affected by exchange rate movements. Investments in the securities of the Issuers or the shares of the Company which provide a short and/or leveraged exposure are only suitable for sophisticated, professional and institutional investors who understand leveraged and compounded daily returns and are willing to magnify potential losses by comparison to investments which do not incorporate these strategies. Over periods of greater than one day, investments with a short and/or leveraged exposure do not necessarily provide investors with a return equivalent to a return from the unleveraged long or unleveraged short investments multiplied by the relevant leverage factor. Investors should refer to the section entitled ”Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuers and the Company. The relevant prospectus for each Issuer and the Company may be obtained from www.etfsecurities.com. Please contact ETFS UK at +44 20 7448 4330 or info@etfsecurities.com for more information.

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Austria: Investors should base their investment decision only on the relevant prospectus of the Company, the Key Investor Information Document, any supplements or addenda thereto, the latest annual reports and semi-annual reports and the memorandum of incorporation and the articles of association, which can be obtained free of charge upon request at the Paying and Information Agent in Austria, Erste Bank der oesterreichischen Sparkassen AG, Graben 21, A1010 Wien, Österreich and on www.etfsecurities.com. France: Any subscription for shares of the Funds will be made on the basis of the terms of the prospectus, the simplified prospectus and any supplements or addenda thereto. The Company is a UCITS governed by Irish legislation and approved by the Financial Regulator as UCITS compliant with European regulations although may not have to comply with the same rules as those applicable to a similar product approved in France. Certain of the Funds have been registered for marketing in France by the Authority Financial Markets (Autorité des Marchés Financiers) and may be distributed to investors in France. Copies of all documents (i.e. the prospectus (including any supplements or addenda thereto, the Key Investor Information Document, the latest annual reports and the memorandum of incorporation and articles of association) are available in France, free of charge, at the French Centralizing Agent, Société Générale, Securities Services, at 1-5 rue du Débarcadère, 92700 Colombes – France. Germany: The offering of the Shares of the Fund has been notified to the German Financial Services Supervisory Authority (BaFin) in accordance with section 310 of the German Investment Code (KAGB). Copies of all documents (i.e. the Key Investor Information Document (in the German language), the prospectus, any supplements or addenda thereto, the latest annual reports and semi-annual reports and the memorandum of incorporation and the articles of association) can be obtained free of charge upon request at the Paying and Information Agent in Germany, HSBC Trinkaus & Burkhardt AG, Königsallee 21-23, 40212 Düsseldorf and on www.etfsecurities.com. The current offering and redemption prices as well as the net asset value and possible notifications of the investors can also be requested free of charge at the same address. In Germany the Shares will be settled as co-owner shares in a Global Bearer certificate issued by Clearstream Banking AG. This type of settlement only occurs in Germany because there is no direct link between the English and German clearing and settlement systems CREST and Clearstream. For this reason the ISIN used for trading of the Shares in Germany differs from the ISIN used in other countries. Netherlands: Each Fund has been registered with the Netherlands Authority for the Financial Markets following the UCITS passport-procedure pursuant to section 2:72 of the Dutch Financial Supervision Act. United Kingdom: Each Fund is a recognised scheme under section 264 of the Financial Services and Markets Act 2000 and so the prospectus may be distributed to investors in the United Kingdom. Copies of all documents (i.e. the Key Investor Information Document, the prospectus, any supplements or addenda thereto, the latest annual reports and semi-annual reports and the memorandum of incorporation and the articles of association) are available in the United Kingdom from www.etfsecurities.com. None of the index providers of the Funds referred to herein nor their licensors make any warranty or representation whatsoever either as to the results obtained from use of the relevant indices and/or the figures at which such indices stand at any particular day or otherwise. None of the index providers shall be liable to any person for any errors or significant delays in the relevant indices nor shall be under any obligation to advise any person of any error or significant delay therein.

Energy ETPs all the rage

Energy ETPs all the rage

ETF Securities Commodity Research: Review of 2015 Commodity ETP Flows

Energy ETPs all the rage

  • Bargain hunters drive strong energy ETC inflows defying the oil price slide of 2015
  • Precious metal ETP outflows cast a shadow in 2015 weighed by the stronger dollar and the indecisiveness of the Fed.
  • Steady rise of inflows over the course of H2 2015 into diversified basket ETPs underpin hopes of a commodity turnaround

Download the complete report (.pdf)

2015 will be remembered as one of the most volatile years for commodities, facing the repercussions of a structural slowdown in China, rising geopolitical risks and the Volkswagen emissions scandal. Asset under management (AUM) in commodity ETPs ended the year lower owing to a significant price impact of -20% and a meagre -1% of flows. Redemptions in gold ETPs were the largest sector contributor to the decline in AUM. In contrast, energy ETPs continued to accumulate assets, as investor inflows surged by 407%, more than offsetting the energy price decline.

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Commodity flows by sector

Commodity ETP flows during the course of the year were extremely uneven. March, April, June and July experienced outflows of nearly US$2.4bn, while the remaining months saw positive inflows. The second half of the year witnessed a steady rise of inflows into diversified baskets, highlighting investor’s preference for strategic portfolio diversification against a backdrop of multi-year low prices.

Outflows were at their heaviest in March 2015, driven mainly by precious metals. Gold in particular, bore the brunt of the US rate hike speculation after robust jobs numbers sent the US dollar higher. Optimism about the global recovery spurred by monetary easing from China and rising sentiment over Greece’s third bailout package reduced gold’s safe haven status, leading to outflows from precious metal ETPs in June and July. As speculation of the first US rate hike in years gained precedence and came to fruition in December, outflows from gold ETPs led the pace of declines in precious metal ETPs.

October faced the onslaught of the Volkswagen emission scandal that impacted palladium (known for its use in gasoline auto catalysts) favourably but dented sentiment for platinum (known for its use in diesel auto catalysts). Negative sentiment emanating from the emissions scandal has underlined a clear disconnect between rising auto sales in Europe and US and plunging prices of platinum group metals known for their majority of use in pollution abatement technology.

Energy ETPs accounted for majority of the outflows in April and May, owing to profit taking and uncertainty over the potential ramp up of oil production from Iran. Furthermore OPECs affirmation of its production ceiling of 30mn barrels per day added to withdrawals from energy ETPs in June. Speculation over production cuts by OPEC and downward revisions in oil output gained precedence in August, driving consistent positive energy ETP flows.

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Interestingly, global production cuts by miners, coupled with an 18% rise in copper imports by China in September buoyed sentiment towards copper in H2 2015. In October a rise in outflows from short copper ETPs marked the most aggressive cut in short ETP positions since June 2014.

Vagaries of oil ETP flows vs price

Oil flows fluctuated over the course of the year, with bargain hunters building positions during oil price corrections. Outflows from WTI and Brent crude oil ETPs occurred from April to June after a build-up of positions in the first quarter of 2015, as oil prices rallied. Mid- year we again saw bargain hunters drive inflows into energy ETPs, despite the overhang of an oversupplied market and the prospect of the Iranian nuclear deal being approved. The WTI- Brent spread moved wider over the H2 of 2015, reaching nearly US$8/bbl in late August/early September. The spread widened partly due to reduced Libyan supply resulting from unrest and escalations of tension in Syria spurring investors to take bullish bets on Brent crude. September was the only month that saw contrasting flows in Brent and WTI crude. Steep price declines in the last quarter of 2015 saw investors continue to pour funds into energy ETPs.

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Broad commodity ETP Flows

With hopes pinned on a turn in the commodity cycle, we saw 50% rise in net flows head to broad diversified basket ETPs.

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In terms of broad sector commodity ETP flows, the contrast between 2014 and 2015 is striking. Precious metal and energy ETP flows more than outpaced the prior year. It has to be noted that energy ETP creations rose by 147% in 2015. Meanwhile, industrial metal ETP flows fell by 210% compared to 2014, owing to concerns surrounding a slowing Chinese economy.

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Few commodities were able to escape the global commodity market rout in 2015 and most of those that did saw price increases due to the positive effects of the El Nino-related weather problems. Agricultural commodities led by cocoa, cotton and sugar earned the top spots on the league table for best performing commodities in 2015. Sugar recorded a price rise of 32% from 23 Sep 2015 to the end of the year owing to the ongoing wet weather in Brazil, the El-Nino related drought in India in the summer and production problems in Thailand. On the other hand the strong El-Nino was responsible for the record warm December experienced across the United States and Europe and added to downward price pressure in the energy sector in the second half of 2015.

Stock-exchange traded turnover in commodity ETPs started the year at a record high of US $4.6bn with energy ETPs remaining the key driver. This level tapered off over the year and peaked again in July owing largely to precious metal ETPs. Gold suffered the largest turnover as market sentiment towards the yellow metal started to wane in response to rising lead indicators of growth in US and Europe coupled with net long positioning in gold falling to its lowest level since June 2013.

(Click to enlarge)

For more information contact

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

Important Information

General

This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the “FCA”).

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value. This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data.

Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. ETFS UK is required by the FCA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates.

In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

If you have any questions please contact ETFS UK at +44 20 7448 4330 or info@etfsecurities.com for more information.

Precious Metals and Cyclicals Continue to Diverge

Precious Metals and Cyclicals Continue to Diverge

Commodity ETP Weekly Precious Metals and Cyclicals Continue to Diverge

Weekly oil ETP inflows highest in four years

Silver, often regarded as a leveraged play on gold was a key beneficiary of the SNB’s shock moves on Thursday.

Flows into long copper ETPs rose to the highest level in 4 weeks after a price capitulation drove bargain hunters to the red metal.

Download the complete report (.pdf)

Flows into Oil ETPs continued at the highest rate in four years. As the price of Brent and WTI oil benchmarks fell a further 6.5% and 5.2% respectively as more investors were drawn to bargains. Precious metals traded higher as the Swiss National Bank shocked the market with a surprise move to abandon the Swiss Franc’s cap against the Euro. Gold played true to its reputation as a hedge against the unexpected, gaining 3.6% over the week. With the World Bank lowering its GDP growth forecasts for 2015, industrial metal prices fell across the board as concerns over demand dragged down their performance. Lower input costs, with falling energy prices, have helped pull down the price of industrial metals.

Weekly oil ETP inflows highest in four years. Long Brent oil ETPs received US$103.4mn of inflows last week, the highest since March 2011, while Long WTI oil ETPs gained US$147.5mn of inflows, the highest since May 2010. Last week saw the 16th and fifth consecutive week of inflows into WTI and Brent ETPs respectively highlighting that investors are undeterred by continued falling prices. On Friday the IEA cut its non-OPEC supply growth for 2015 on the back of the price fall, and claimed that it will “raise the call” on OPEC to trim production in the second half of 2015 to an average of 29.8 mb/d, just under the official target of 30 mb/d. Oil prices reacted positively to these forecasts at the end of the week. The spread between Brent and WTI narrowed last week with WTI temporarily trading higher than Brent driven by the speed at which both supply and demand are likely to respond more quickly in the US than elsewhere. We, like the IEA believe that non-OPEC production cuts will be the necessary catalyst for OPEC cuts in the latter half of 2015.

Silver, often regarded as a leveraged play on gold was a key beneficiary of the SNB’s shock moves on Thursday. Silver prices gained 4.6% over the week. Inflows of US$114.9mn into ETF Physical Silver (PHAG) were at their highest since February 2014. Most of those flows came before Thursday’s currency turmoil. The gold to silver price ratio had risen to a multiyear high at the end of 2014, highlighting silver’s relative attractive price as an insurance asset. Interest in hedge-assets has recently increased with the VIX and IVSTOXX showing a marked increase. With Greece going to the polls on Sunday, the market is bracing itself for further discourse in Europe.

Flows into long copper ETPs rose to the highest level in 4 weeks after a price capitulation drove bargain hunters to the red metal. While there were multiple reasons for the 8% decline in copper prices last week including the bearish World Bank growth forecasts and selling by Chinese funds at illiquid times of the day, there was only US$0.5mn of inflows into ETFS Daily Short Copper (SCOP) whereas US$4.8mn flowed into long copper ETPs. Some investors believe we are closer to the bottom in copper prices with demand weakness fully priced-in and the potential for another year of supply deficits ahead. Although the International Copper Study Group has forecast supply surpluses at the beginning of the past two years, we have ended the year in deficit. We could have a déjà vu moment again in 2015.

Key events to watch this week. China’s GDP figures will be closely watched to assess the strength of demand from the world’s largest consumer of commodities. The European Central Bank is widely expected to announce full-blown quantitative easing this week after years of resisting following the US on this path. Discussion of the modalities of the programme will no doubt drive asset price rallies – the direction dependent on how inclusive or restrictive the programme will be.

Video Presentation

Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

For more information contact

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

Important Information

General

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.

This is a strictly privileged and confidential communication between ETFS UK and its selected client. This communication contains information addressed only to a specific individual and is not intended for distribution to, or use by, any person other than the named addressee. This communication (i) is provided for informational purposes only, (ii) should not be construed in any manner as any solicitation or offer to buy or sell any securities or any related financial instruments, and (iii) should not be construed in any manner as a public offer of any securities or any related financial instruments. If you are not the named addressee, you should not disseminate, distribute or copy this communication. Please notify the sender immediately if you have mistakenly received this communication. When being made within Italy, this communication is for the exclusive use of the ”qualified investors” and its circulation among the public is prohibited.

This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

This document may contain independent market commentary prepared by ETFS UK based on publicly available information. ETFS UK does not warrant or guarantee the accuracy or correctness of any information contained herein and any opinions related to product or market activity may change. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data.

Any historical performance included in this document may be based on back testing. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance.

Historical performance is not an indication of or a guide to future performance.

The information contained in this communication is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision.

ETFS UK is required by the United Kingdom Financial Conduct Authority (”FCA”) to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

Risk Warnings

Any products referenced in this document are generally aimed at sophisticated, professional and institutional investors. Any decision to invest should be based on the information contained in the prospectus (and any supplements thereto) of the relevant product issue. The price of any securities may go up or down and an investor may not get back the amount invested. Securities may valued in currencies other than those in which there are priced and will be affected by exchange rate movements. Investments in the securities which provide a short and/or leveraged exposure are only suitable for sophisticated, professional and institutional investors who understand leveraged and compounded daily returns and are willing to magnify potential losses by comparison to investments which do not incorporate these strategies. Over periods of greater than one day, investments with a short and/or leveraged exposure do not necessarily provide investors with a return equivalent to a return from the unleveraged long or unleveraged short investments multiplied by the relevant leverage factor. Investors should refer to the section entitled ”Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in any securities referenced in this communication.

If you have any questions please contact ETFS UK at +44 20 7448 4330 or info@etfsecurities.com for more information.

Global Commodity ETP Quarterly Q3 2014

Global Commodity ETP Quarterly Q3 2014

Global Commodity ETP Quarterly Q3 2014 The report includes:

  1. A comprehensive and fully up-to-date reference guide to investing in global commodity ETPs and indexes – no ETP type or geographic area is excluded. The report details the large and growing choice of commodity ETP exposures and strategies around the world.
  2. Summary analysis of global commodity ETP flows, trading volumes and AUM trends. Includes a detailed analysis of the main trends in Q3 2014 and the outlook for the rest of the year.
  3. Roll yield analysis (contango/backwardation) broken down by individual commodity and commodity sectors.
  4. Useful fundamental commodity data and information. An updated and revised inventory trends section, positioning data, futures curve developments, commodity index compositions and weights.

 

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Throughout the Global Commodity ETP Quarterly, commodity ETPs have been grouped into six main sectors as detailed below:

  • Diversified Broad contains Diversified Broad, Diversified Broad ex Agriculture and Livestock, Diversified Broad Light Energy and Diversified Broad ex Energy basket commodity ETPs
  • Agriculture contains Diversified Agriculture basket, Cocoa, Coffee, Corn, Cotton, Grains, Rice, Softs, Soybeans, Soybean Meal, Soybean Oil, Sugar and Wheat commodity ETPs
  • Energy contains Diversified Energy basket, Biofuels, Carbon, Coal, Crude Oil, Electricity, Gasoline, Heating Oil, Natural Gas and Petroleum commodity ETPs
  • Industrial Metals contains Diversified Industrial Metals basket, Aluminium, Copper, Lead, Nickel, Tin, Uranium and Zinc commodity ETPs
  • Livestock contains Diversified Livestock basket, Feeder Cattle, Lean Hogs and Live Cattle commodity ETPs
  • Precious Metals contains Diversified Precious Metals basket, Gold, Palladium, Platinum, Rhodium and Silver commodity ETPs Exchange Traded Products (ETPs) is the umbrella term covering Exchange Traded Funds (ETFs), Exchange Traded Commodities (ETCs), Exchange Traded Notes (ETNs), US Limited Partnerships (LPs), US Guarantor and other statutory trusts. Commodity ETPs are open-ended securities listed on a stock exchange tracking an underlying commodity asset. They do not include ETPs tracking the listed equities of companies involved in commodity businesses.

If not otherwise stated, all data in the publication is in US dollars.

 

Commodity ETP Flows Resilient in the Face of Price Declines

 

Summary

 

Commodity ETPs were hit hard in Q3 2014 as a strong US dollar and concerns about China and Europé growth knocked many commodity prices down towards their production costs.

Following two consecutive quarters of increases, commodity ETP assets under management (AUM) fell by US$12.6bn to US$110.7bn, the lowest level since Q1 2010. However, close to 96% of the AUM decline was caused by price declines, with net investor outflows during the quarter a relatively resilient US$550mn.

The resilience of investor flows likely reflects a number of factors. The first is that most of the large, leveraged tactical players in commodity ETPs cleared their positions in 2013, as reflected in the large outflows that year. The bulk of investors in commodity ETPs today tend to be strategic investors with medium to long-term time horizons who tend to be less sensitive to short term price swings.

A second key factor is that with most commodities now trading near (and in some cases below) their estimated all-in or marginal costs of production, many investors with long-term investment horizons are looking at current prices as attractive accumulation levels on the view on-going production cuts and a steady structural rise in demand from increasingly wealthy large population developing countries will ultimately push prices higher.

Lastly, a large part of the commodity price declines over the past month or so has been driven by the strong rally in the US dollar and concerns about slower growth in China and Europe. US dollar strength is being driven by healthy US economic growth – a positive for commodity demand. Meanwhile, policy-makers in both China and Europe have started – and are expected to continue – to react strongly to recent signs of economic weakness.

Given the above potential positive price catalysts and the fact that many commodities are trading at their lowest levels relative to their production costs since the crisis of 2008, there are some signs tactical investors are beginning to nibble – particularly with valuations across a number of major equity and most fixed income markets looking stretched. Over the course of Q3, broad commodity index ETPs saw inflows as well as some of the more bombed out individual commodities and sectors such as agriculture, select industrial metals and natural gas.

Key Trends

 

Gold ETPs accounted for nearly 60% of the decline in global commodity ETP AUM, with AUM dropping by US$7.4bn to US$69bn. Of the AUM decline, 82% was due to the gold price decline over the quarter. While investors sold into the price decline, selling was far more muted than during the price declines of 2013, indicating most tactical investors have already exited.

 

 

After gold, platinum and palladium saw the largest outflows in Q3, with US$194mn and US$74mn of outflows respectively. Silver ETPs saw the largest inflows in Q3, with US$452mn of net new investor flows despite (or perhaps because of) the sharp price decline. Many investors appear to view the silver price below US$20/oz as a good long-term accumulation level.

 

 

Agriculture ETPs also saw inflows during the quarter as low prices brought investors into most of the grains as well as cotton.

 

Broad commodity index tracking commodity ETPs saw inflows of US$561mn in Q3 2014, indicating strategic investors are starting to view commodities as a more attractive asset class as equity and bond market valuations have become more stretched and commodity prices have declined.

 

Oil ETPs saw strong inflows in August as prices lurched lower, however in September these flows reversed as it appears some investors capitulated in the face of continued price declines. For the quarter as a whole oil ETPs saw US$83mn of outflows. Meanwhile as the natural gas fell from its heights investors started to nibble, with US$21 of inflows

 

Industrial metal ETPs saw mixed flows, with the net result a very modest US$29mn of inflows into the sector. While copper ETPs saw US$29mn of outflows, aluminium, nickel and industrial metal basket ETPs all saw inflows.

 

Summary and Outlook

 

Assuming the US maintains its current economic trajectory, the key to commodity performance and flows through the rest of 2014 and into 2015 will be how successful both Europe and China are in restimulating their economies. Stronger economic growth in both of these major markets would not only help boost commodity demand and improve general sentiment, but also likely take some of the steam out of the very strong recent US dollar rally (which has been as much about weakness abroad as strength at home) that has been weighing on commodity performance. Increasingly aggressive easing moves by ECB President Mario Draghi and policy-makers in China in the coming months and quarters could be the stimulus commodity markets have been waiting for.

Click here to download the complete report (.pdf)

 

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

 

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