Etikett: commodity

Geopolitical risks drove ETP flows last week

Geopolitical risks drove ETP flows last weekGeopolitical risks drove ETP flows last week

ETF Securities Weekly Flows Analysis – Geopolitical risks drove ETP flows last week

Highlights

  • Oil ETP see US$39.5mn outflows as investor take profit on 3.2% rise in oil price.
  • Gold continues to attract inflows in an environment of heightened political risk.
  • ETF investors short Italy in anticipation of a fallout this week.

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Long oil ETP see US$39.5mn outflows as investor take profit on 3.2% rise in oil price. Oil prices have risen to a to a 3½ -year high on the back of the US announcing the re-introduction of sanctions against Iran. Global oil markets have already become tight as a result of outages from Venezuela and strong compliance from the Organization of Petroleum Export Countries (OPEC) with their accord to curb production. Given that the US does not import any Iranian oil and no importing country appears to agree with the US stance, we expect only minimal compliance with the US’s extraterritorial rule. In short the sanctions are unlikely to kill Iranian oil, but the geopolitical premium is likely to linger. Some of the more recent gains are likely to be deflated as other countries increase production. Investors appear to be taking profit as the gains look unsustainable.

Gold continues to attract inflows in an environment of heightened political risk. The political calendar is busy. A meeting between Donald Trump and Kim Jong Un is on the radar for the coming month and there are many risks around the nuclear powers butting heads rather than developing a peace plan. The US’s intervention in Iran is a sign that it is re-establishing its diplomatic presence in the Middle East. Whether that will help or hinder stability in the region is yet unknown. If Iran decides to pull out of the agreement (Joint Comprehensive Plan of Action) itself, we believe the region could transcend into chaos and the proxy-war between Saudi Arabia and Iran will escalate. Long gold ETPs received US$16.7mn in inflows, while closely correlated silver ETPs received US$3.1mn.

Short FTSE MIB equities attracted its largest inflows since June 2017 as investors fear the coalition of anti-establishment parties in Italy. Short FTSE MIB ETPs gained US$3.6mn while long FTSE MIB saw US$4.5mn of outflows. There had been surprisingly little reaction from bond and equity markets surrounding the deadline set for yesterday around the forming of a coalition. We believe ETP investors have positioned for a fallout this week.

Investors appear split over aluminium’s direction. Long aluminium ETPs received US$1.9mn – largest weekly inflows since February 2018 – while short aluminium ETPs received US$1.1mn – largest weekly inflows since May 2016. Although prices have come off their highs reached last month when the US sanctions against a major shareholder of a Russian miner were announced, prices are likely to rise as these sanctions (and trade restrictions against China) come into effect.

Investors become more bullish the euro vis-à-vis the US dollar. Last week, investors bought US$9.7mn of long EUR short USD ETPs, and sold $8.3mn of long USD short EUR ETPs. Investors appear unconvinced that US dollar’s recent moderate appreciation can be sustained. Although with economic data continuing to weaken in Europe and little indication that the Federal Reserve will be deterred from raising rates another couple of times this year, we think that there is potential for rate differentials to drive the US dollar higher.

For more information contact:

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0)207 448 4330
E research@etfsecurities.com

Important Information

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.

Broad commodity basket ETPs took the lion’s share of flows

Broad commodity basket ETPs took the lion’s share of flows

ETF Securities – Broad commodity basket ETPs took the lion’s share of flows

Highlights

  • Diversified commodity basket ETPs dominate inflows.
  • Softening momentum in global manufacturing data sparked outflows from copper, aluminium and industrial metal basket ETPs.
  • Outflows from gold ETPs rose for the fifth consecutive week amidst a strong US dollar.
  • Crude oil ETPs faced another week of outflows as higher inventory data caused oil prices to decline.

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Inflows into diversified commodity basket ETPs, totalling US$92.5mn surged to their highest level since May 2016. Rising volatility across global financial markets in conjunction with supportive fundamentals for most commodities favours the case for diversifying a portfolio.

Softening momentum in global manufacturing data sparked outflows from copper, aluminium and broad industrial metal basket ETPs worth US$28.9mn, US$11.1mn and US$14.8mn respectively. The decline in Chinese Purchasing Managers Index (PMI) for the manufacturing sector to its lowest level since July 2016 appears to have stoked concerns of future demand for industrial metals, coupled with weaker manufacturing PMI data across US, Europe and UK. Added to that, copper production in Chile, home to the world’s largest copper mining producer, rose 6.3% over the prior year in January providing evidence of rising copper supply. The imposition of trade tariffs by President Trump on steel and aluminium imports generated volatility across industrial metals prompting outflows from industrial metal basket and aluminium ETPs for the first time in three weeks. Nickel ETPs bucked the trend, by recording inflows of US$9.4mn owing to expectations of demand from battery technology.

Outflows from gold ETPs amounting to US$93.8mn rose for the fifth week in a row amidst a strong US dollar. In the first nine weeks of 2018, the overall trend of gold ETP flows has largely been negative. Last week marked the fifth consecutive week of gold ETP outflows as the US dollar strengthened in the aftermath of Federal Reserve chairman Jay Powell’s optimistic view of the US economy and upward trajectory of interest rates. Meanwhile, precious metal basket ETPs garnered inflows worth US$11.1mn for the fifth consecutive week.

Crude oil ETPs faced another week of outflows worth US$15.8mn. Since the start of 2018, there has only been one week of inflows into crude oil ETPs highlighting the ensuing pessimism amongst ETP investors, who have been opportunistically selling into the price rally that began around June 2017. Last week, crude oil prices came under significant pressure owing to an unexpected sharp increase in US crude oil stocks in conjunction with the firmer US dollar. Added to that, weaker manufacturing data in China, known to be the world’s largest crude oil importer, amplified risk aversion amongst investors. The drop in OPEC production to a 10-month low in February failed to counteract the bearish sentiment since it is largely attributable to temporary production shortfalls in Venezuela.

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

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.

 

Commodity outflows surge as US dollar rebounds

Commodity outflows surge as US dollar rebounds

ETF Securities – Commodity outflows surge as US dollar rebounds

Highlights

  • Inflows into nickel ETPs rise for the 3rd consecutive week, attaining their highest level since inception.
  • Gold ETP outflows rise to their highest level since September 2017 on the back of a strong jobs report.
  • Outflows from diversified basket ETPs climb to their highest level in 16 weeks, reversing 5 weeks of inflows.
  • Commodity outflows surge as US dollar rebounds

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Inflows into nickel ETPs rise for the 3rd consecutive week, surging to their highest level since inception, totalling US$71mn. The weaker US dollar coupled with a robust stainless steel market have helped drive nickel prices up 9% so far this year (as of 2 Feb 2018). Added to that, higher cobalt prices are triggering the substitution of cobalt with nickel in lithium-ion batteries, thereby raising expectations of future demand for nickel from battery led technology. The International Nickel Study Group (INSG) expects China to drive further demand growth in 2018. While Indonesian nickel ore production has driven global output to record levels, global inventories have been falling. Nevertheless, nickel’s deficit is expected to be smaller in 2018 vs 2017 according to INSG.

Gold ETP outflows worth US$251mn rose to their highest level since September 2017. Despite the selloff in global equity markets last week, gold prices came under significant pressure after the US dollar rallied on the back of a strong US jobs report. US nonfarm payrolls jumped by 200,000 last month and average hourly wages climbed 2.9% year-on-year (the highest since May 2009). The acceleration in wage growth had long been awaited by market participants and drove speculation that the Federal Reserve would lift US interest rates more aggressively than previously expected. Gold, which offers no yield, remains vulnerable into a rising rate environment.

Crude oil ETPs experienced the 24th consecutive week of outflows, totalling US$22.3mn last week. US oil production is set to increase in the coming months partly owing to productivity gains and as drilling activity picks up. The Energy Information Administration (EIA) expects production in the US to rise by just shy of 1 million barrels per day this year, which should cover more than half of the increase in global oil demand estimated by the EIA. We expect to see crude oil prices correct owing to rising growth in US oil production and an increase in stocks in the first quarter.

Outflows from diversified basket ETPs amounting to US$21.6mn surged to their highest level in 6 weeks, reversing 5 weeks of inflows. The commodity complex, led by energy and precious metals, suffered widespread losses last week as the greenback reversed its downward trend.´

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

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.

 

Commodity Optimism Rises with Reflation

Commodity Optimism Rises with Reflation

Investment Insights January 2018 – Commodity Optimism Rises with Reflation

Summary

  • Global manufacturing may push commodity demand higher.
  • Investors yet to regain previous positions in commodity funds.
  • Commodities outperform in high growth and inflation periods.

Growth and manufacturing activity points to higher commodity demand

The global economy is in full throttle with synchronized growth among both developed and emerging economies. Global growth as measured by gross domestic product is expected to rise to 3.9% this year according to the International Monetary Fund. Further signs of economic reflation stem from the expansionary levels in global manufacturing and industrial activity. Recent global manufacturing Purchasing Managers’ Index (PMI) levels are at a four year high while US manufacturing PMI ending 2017 at 59.7 after hitting a 13 year high in September 2017. Increased manufacturing activity may further support commodities as demand for raw materials and trade persists against higher industrial and economic activity.

Inflation is also on the rise as evidenced by increasing inflation expectations, a tightening labor market, and a weaker US dollar. Commodities, which historically hedge inflation, may further rise as inflationary pressures in the latter stages of the economic cycle.

Investor flows may kick commodities into high gear

On January 20th, 2016 the Bloomberg Commodity Index hit an all-time low falling 48% since December 31st, 2012 . Over this period commodity funds experienced $24.5 billion in net outflows.

As commodity fundamentals improved from a global glut, the index rebounded 24% from this bottom (see Exhibit 2). Investor flows, however, recouped only half of their previous holdings with net inflows of $14 billion since January 21st, 2016. As the commodity outlook improves, a return of investor interest may further support commodity prices as inflows rise to rebuild portfolio positions.

Conducive backdrop for outperformance

Periods of rising growth and high inflation have historically benefited commodities over stocks, bonds, and cash (See Exhibit 3). This outperformance is indicative of rising commodity demand at late stages of the economic cycle. The current backdrop of synchronized growth and rising inflationary pressures mirrors this cyclical stage and may see commodity returns outperform further.

Source: Bloomberg, ETF Securities. Table data from 01/30/76 to 12/31/17. Commodities = S&P GSCI TR Index, Global equities = MSCI World TR Index, Bonds= Barclays US Aggregate TR Index, Cash = 3 month US Treasury bill. High/low inflation = top/bottom 20% of months in US headline consumer price index (CPI), Slowing/rising growth = top/bottom 20% of months in US PMI.

Important Risks

The statements and opinions expressed are those of the author and are as of the date of this report. All information is historical and not indicative of future results and subject to change. Reader should not assume that an investment in any securities and/or precious metals mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results.

The Bloomberg Commodity Index is a broadly diversified commodity price index distributed by Bloomberg Indexes. The S&P GSCI Index provides investors with a reliable and publicly available benchmark for investment performance in the commodity markets. The ISM Purchasing Manufacturing PMI Index (PMI) is an indicator of the economic health of the manufacturing sector. The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services; headline includes all categories while core excludes food and energy. The MSCI World Index is a free-float weighted equity index developed to track developed world markets, and does not include emerging markets. The Barclays US Aggregate Bond Index (Barclays Agg) is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. Gross Domestic Product (GDP) is the total value of goods produced and services provided in a country during one year.

Diversification does not eliminate the risk of experiencing investment losses.

Maxwell Gold is a registered representative of ALPS Distributors, Inc.

US dollar gives transitory boost to commodities

US dollar gives transitory boost to commodities

Commodity Monthly Monitor US dollar gives transitory boost to commodities

Your reference guide to commodity markets. Includes the latest outlook for each commodity sector and major developments for individual commodities.

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Summary

  • Global oversupply projected to continue for 2017/2018.
  • Weaker US dollar provides additional support to the improving fundamentals for industrial metals.
  • Energy rally looking stretched.
  • Further upside for precious metals amidst weaker US dollar

Summary

Commodities have enjoyed a great start to 2018. From the low point mid-December they have rallied 6.7%. The performance has been broad-based too – driven not only by the Iran issues inflating the oil price – but a rally in industrial/precious metals and agriculture. Broad global economic growth has supported commodity prices, although we are wary of some who are interpreting this as being a positive sign broadly for commodities this year. Commodities as an asset class are a very heterogeneous group and we expect varied performance from each segment this year in particular.

Although we expect the Fed to continue to tighten policy, we think the downside risks to gold prices are limited because real interest rates will remain depressed as inflation gains pace in the US. However, a shock event, such as an equity market correction, could force gold prices higher. On balance we see little change in gold prices in the coming year.We expect the best performer for 2018 to be industrial metals. They are likely to benefit the most from improving emerging market growth, at the same time we expect supply to remain in deficit in 2018 as the current lack of investment in mining infrastructure continues to bite.

Historically we have found that metal markets begin to move towards a balance two years after miner profit margins hit rock-bottom. Miner margins fell to a low of 2% at the beginning of 2016 and since have recovered to just over 7%. So if we see a repeat of historical patterns, we should see supply begin to improve in late 2018, but it could take years to move back into balance.

Global oversupply projected to continue

Global oversupply projected to continue for 2017/2018. The USDA January World Agricultural Supply and Demand (WASDE) report updates show most of the commodities in a surplus. Performance across the sector have been mixed over the past month. Cotton continues to benefit from strong Chinese demand while the prospects for the sugar market will likely keep prices subdued for longer.Weaker US Dollar provides additional support to the improving fundamentals for industrial metals. The IMF has upgraded its growth forecast for China in 2018 and 2019.

With the global recovery continuing apace, the weaker US Dollar will remain supportive until the US Federal Reserve is forced to adjust monetary policy more aggressively than the market expects. Energy rally looking stretched. The energy complex rallied by 9.1% last month. Natural gas spiked as cold weather hit the US and signs of OPEC’s strategy bearing fruit pushed oil prices higher. However, demand for natural gas is likely to wane in line with seasonal trends and the decline in oil inventories is corollary of rising gasoline inventory.Further upside for precious metals amidst weaker US dollar. US dollar weakness driven by the US government shutdown and rumours that China could curb Treasury purchases are boosting gold’s safe haven appeal. Meanwhile platinum’s relative price attractiveness coupled with rising new car registrations in Europe (dominated by diesel engines) continue to support long term demand for platinum.

For more information contact:

Catarina Donat Marques
ETF Securities (UK) Limited
T +44 20 7448 4386
E catarina.donatmarques@etfsecurities.com

Important Information

The analyses in the above tables are purely for information purposes. They do not reflect the performance of any ETF Securities’ products . The futures and roll returns are not necessarily investable.

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 (the “FCA”).

This communication is only targeted at qualified or professional investors.

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

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.