Six Consecutive Weeks Of Flows Into Long Gold And Oil ETPs

Six Consecutive Weeks Of Flows Into Long Gold And Oil ETPs. With US$35.0mn of inflows last week, ETF Securities long gold ETPs have seen their longest stretch of consecutive positive flows since October 2012

Long WTI ETP inflows rise to US$17.0mn, the highest in four months, while short WTI ETPs see their largest outflow since November 2013

ETFS Corn (CORN) sees highest inflow since March 2014

ETFS Wheat (WEAT) continued to see its 14th consecutive week of inflows

Profit taking drives flows out of platinum group metal (PGM) ETPs

Six consecutive weeks of flows into long gold and oil ETPs highlight investors’ concern over geopolitical events. The US Defense Secretary declared the terrorist group, Islamic State, to be the most dangerous threat that the US has faced in years. A growing sense that the conflict in the Middle East will be a long, drawn-out affair has led investors to expand their holdings of defensive assets. However, the price of gold fell last week, as policy setters at the central banks of the UK and US appear to be more open to raising interest rates.

With US$35.0mn of inflows last week, ETF Securities long gold ETPs have seen their longest stretch of consecutive positive flows since October 2012. The sixth week of inflows, despite modest price performance, highlights the extent to which sentiment towards gold has changed since last year when investors in ETPs and futures markets were abandoning the metal in droves. Investors are rebuilding the hedges into their portfolios after having taken them off in 2013.

Long WTI ETP inflows rise to US$17.0mn, the highest in four months, while short WTI ETPs see their largest outflow since November 2013. While Brent ETPs have been the main beneficiary of rising geopolitical risk, seeing 11 consecutive weeks of inflows, WTI ETPs are gaining favour as the price of the benchmark remains relatively cheap. WTI has seen five consecutive weeks of price declines as inventories remain well above the 5-year average. However, the market could tighten with OPEC and the EIA expecting demand to pick up and US inventories last week fell substantially more than forecast.

ETFS Corn (CORN) sees highest inflow since March 2014. Bargain hunting drove US$4.6mn of inflows into the ETP as expectations of record yields and production have beaten the price down to the lowest since 2010. However, with near-perfect conditions completely priced-in, a small disruption to weather conditions could drive prices upwards. ETFS Wheat (WEAT) continued to see its 14th consecutive week of inflows, attracting US$0.6mn last week as the price of wheat gained 1.7%. Wheat prices are also close to their lowest since 2010, driven by expectations of a bumper crop in the US. Last week however, Ukraine finally confirmed that conflict affected regions will not be able to export as much as normal and a poor crop is expected in France, which will both help tighten the global market.

Profit taking drives flows out of platinum group metal (PGM) ETPs. With year-to-date gains of 22.5% and 4.6% for palladium and platinum, respectively, many investors feel like the best of the rally is over. Although platinum fell 3.3% last week, reports of mine closures in Zimbabwe and rising Chinese imports toward the end of the week, could reverse the downtrend. We believe that platinum will rise faster than palladium in coming months, allowing the metal to narrow the recent underperformance. US$105.8mn and US$34.3mn flowed out of ETFS Physical Palladium (PHPD) and ETFS Physical Platinum (PHPT), respectively.

Key events to watch this week. Euro area unemployment and inflation data will be closely watched as the market tries to guess the pace at which the European Central Bank will loosen its policy setting. The second estimate of US Q2 GDP if unchanged or higher, could help consolidate the US dollar’s strength, which would typically weigh on commodity prices.

Download the complete report (.pdf)

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.