Global political upheaval offers a silver lining to ETP flows

Global political upheaval offers a silver lining to ETP flows ETF SecuritiesGlobal political upheaval offers a silver lining to ETP flow

ETF Securities – Global political upheaval offers a silver lining to ETP flows

Highlights

  • Silver ETPs attracted the lion’s share of inflows.
  • Inflows into global equity ETPs led by robotics rose to their highest level in 8 weeks.
  • Safe haven currency seekers drove inflows into long yen ETPs to their highest level on record.

Download the complete report (.pdf)

Silver ETPs attracted the lion’s share of inflows, worth US$54.5mn, marking its highest level of inflows since September 2017. The main catalyst has been the political tensions emanating between the UK and Russia over the poison attack on a former Russian spy in England. Britain has imposed sanctions on Russia and in retaliation Russia intends to expel British diplomats. The US, France and Germany have also shown their support for the UK and hold Russia responsible for the poison attack.

Added to that, the frequent shake-up of the Trump Administration, which last week saw the dismissal of secretary of state Rex Tillerson owing to differences over foreign policy issues, have raised concerns over protectionist US policies. Silver is attractively priced, with the gold to silver price ratio remaining elevated relative to recent history. We continue to have a positive view on silver’s fundamentals owing to a strong industrial cycle and constrained mine supply and expect silver to play catch-up in 2018.

Gold ETP flows reversed the prior week’s anomaly of inflows in 2018 by posting outflows of US$28.7mn. Gold prices tend to show weakness in the run-up to Fed meetings. This was evident last week as investors shifted their attention to this week’s Federal Reserve policy meeting, gold prices headed for their biggest weekly drop in a month. The key takeaway will be the likelihood of four rate hikes in the Fed’s projected dot plot for 2018.

Inflows into global equity ETPs, led by robotics worth US$24mn rose to their highest level in eight weeks. Looming political risks and rising protectionist policies caused global equity markets to end the week on a weaker footing. As a consequence investors sought to increase exposure to niche sectors within technology such as robotics and cybersecurity.

Redemptions from US equities totalling US$9.8mn led by Master Limited Partnership (MLPs) rose to their highest level since June 2015. Subsequent to the ruling from the Federal Energy Regulatory Commission (FERC) last week disallowing income tax recovery on interstate pipeline contracts, the MLP industry faced a broad sell off. We believe this is an overreaction. We expect pipelines owned by MLPs that cross state lines and rely on FERC-regulated tariffs to be the most impacted by this ruling.

Long Yen ETPs attracted the highest inflows on record amounting to US$25.2mn as investors took shelter among safe haven currencies amidst the global political upheaval.

Tighter monetary policy signalled by Norway’s central bank led to US$9.3mn of outflows from NOK ETPs. Last week Norway’s central bank signalled it will raise interest rates faster than expected supported by higher growth and a change in the inflation target. This led buoyancy to the Norwegian Krona, that surged 0.9%, reaching its highest level since November 2017.

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.

 

Gold’s fair value at US$1440 as uncertainty reigns

Gold’s fair value at US$1440 as uncertainty reigns

Gold’s fair value at US$1440 as uncertainty reigns. The US Dollar, Yen, the Swiss Franc and gold have all been beneficiaries of investors seeking haven asset as Britain’s decision to leave the EU has left the world in shock. We believe prolonged uncertainty will keep demand for defensive assets elevated. Gold’s fair value at US$1440 as uncertainty reigns Net speculative futures market positioning in gold had already risen to all-time high before the “Brexit” vote and we suspect positioning has moved considerably higher in recent days (data only available weekly with delay). Net speculative positioning hit a record high of 316,525 long contracts last Tuesday, far above the 289,250 net longs hit during the worst of Greek sovereign crisis and considerably above the 83,000 contract average since beginning of the series. Given the lack of clarity about the future course of the UK’s relationship with the EU or other countries, we expect market uncertainty to keep demand for gold strong for some time and that will be reflected in elevated speculative positioning. Analysts will struggle to assess the impact of Brexit until Article 50 of the Lisbon Treaty is invoked and it could take up to two years after that point for the UK to formally leave. The US Dollar basket (DXY) has risen by close to 4% since the announcement of Brexit. We believe that it could rise further as investors look for haven assets. We also assume the US Federal Reserve will at some point in the coming year raise interest rates (on the assumption that Brexit contagion to the real economy of the US is limited). While US Dollar appreciation is usually gold price-negative, the rise in haven demand is often more price-positive. Indeed we have seen over the past few days that gold and the US Dollar have both risen.
Given the heightened uncertainty about how events will unfold, we present some scenarios for gold prices. We use our proprietary gold model that we presented in “Policy mistakes provide upside potential for gold” and vary the assumptions on US Dollar movements and level of speculative positioning (presented above). We assume that US inflation will hover around 1.1% (around current levels), based on 1yr-1yr break-evens and nominal 10 year Treasury rates will also remain around current levels even if policy rates rise (we assume a bond curve flattening rather than a shift). Using our central assumptions, for example a modest US Dollar appreciation of 5% and speculative positioning remaining elevated, but moderating to 200,000 contracts, gold is likely to trade around US$1440/oz by June 2017. In the absence of any US Dollar appreciation, gold could trade closer to US$1500/oz.

Nitesh Shah, Research Analyst at ETF Securities

Nitesh is a Commodities Strategist at ETF Securities. Nitesh has 13 years of experience as an economist and strategist, covering a wide range of markets and asset classes. Prior to joining ETF Securities, Nitesh was an economist covering the European structured finance markets at Moody’s Investors Service and was a member of Moody’s global macroeconomics team. Before that he was an economist at the Pension Protection Fund and an equity strategist at Decision Economics. He started his career at HSBC Investment Bank. Nitesh holds a Bachelor of Science in Economics from the London School of Economics and a Master of Arts in International Economics and Finance from Brandeis University (USA).

Setting the Stage for the Next Gold Bull Market

Setting the Stage for the Next Gold Bull Market

Market Review – Setting the Stage for the Next Gold Bull Market

The gold market moved to the beat of the Federal Reserve’s (the “Fed”) rate hike signal drumming in May. At the beginning of May, the probabilities of a rate increase, as implied by the federal funds futures markets1, were 12% for an increase in June and 26% for a July increase. That dropped to 4% for June and 19% for July by May 16. On May 18, the market interpreted the minutes from the Federal Open Market Committee (the “FOMC”) April meeting as being more hawkish than anticipated and market expectations of rate increases in June and July jumped to 32% and 47%, respectively. Gold traded down for nine consecutive sessions following the release of the minutes. Gold dropped to an intra-day low of $1,199 per ounce on May 30, and ended the month at $1,215 per ounce for a loss of 6.0% or $77.66.

The U.S. dollar, which historically has a strong negative correlation2 with the gold price, also reflected the market’s assessment of a rate hike this summer, with the U.S. Dollar Index (DXY)3 ending May up 3% for the month. The change in market sentiment regarding upcoming Fed rate decisions was primarily driven by comments from Fed Chair Janet Yellen and other Fed officials. Meanwhile, U.S. economic data releases continued to be mixed, and, in our view, do not paint a clear picture of the U.S. economy that would favor further tightening in the near term. Positive April economic data included retail sales and existing and new home sales coming in above expectations, and an increase in the ISM Manufacturing Index4 reading for May that was widely expected to be declining. In contrast, employment data and construction spending were below expectations while the University of Michigan Sentiment Index5, Consumer Confidence Index6 and manufacturing activity in Chicago and Dallas for May were all weaker than expected.

But the most impactful, in our opinion, economic data was the May jobs report announced by the U.S. Department of Labor on June 3. Reported figures were massively below expectations, showing the lowest number of workers added in six years. While market chatter before the report’s release may have suggested the Fed had everyone convinced of a summer hike, a hike was not priced in for June, as evidenced by the 20% implied probability. The chance of a July hike was only at 53.6%. Immediately after the jobs report, those probabilities dropped to 4% and 29% respectively, the DXY index fell (down 1.7%) and gold rallied (up 2.8% or $33 per ounce), closing at $1,244 per ounce on June 3.

With gold falling in May, gold stocks underperformed. The NYSE Arca Gold Miners Index (GDMNTR)7 fell 11.9%, and the MVIS Global Junior Gold Miners Index (MVGDXJTR)8 dropped 11.5% during the month, trimming gains for the year to 65% and 76% respectively, as of May 31, compared to gold’s gain of 14.5%.

Of note, the amount of gold held by global gold bullion exchange traded products (ETPs) increased by an additional 4.8% during the month of May. Holdings of global gold ETPs have increased almost 27% this year to an estimated 59.5 million ounces of gold, still well below the 2012 peak of more than 84 million ounces.

Market Outlook

We have been of the opinion that the Fed may not be as aggressive as previously guided, and that rising rates in 2016 could be a significant impediment to the U.S. economy. The June 3 jobs report missed expectations by a wide margin. In May, the U.S. added just 38,000 workers, compared to the median of 160,000 as forecasted by Bloomberg. Job gains for prior months were downgraded as well. This indicates a weakening labor market and reduces the odds of Fed rate increases in the coming months.

We believe this is another important inflection point for gold that suggests the early stages of a new bull market. The gold price has been consolidating in the $1,200 to $1,300 per ounce range since early March, hitting a low of nearly $1,200 per ounce on May 30. It now appears as if gold is poised to remain above the technically and psychologically important $1,200 per ounce level. While it is not uncommon for the gold price to struggle in the summer months, we believe gold is forming a new base. We expect to see higher gold prices as the year progresses. Gold Price Monthly Return Average, 1971-2015 and 2016

Source: Bloomberg, Scotiabank GBM

We met the management of approximately 20 gold companies during the month, which allowed us to get a good sense of what’s happening in the sector. The main takeaway is that while companies are still focused on efficiencies, cost savings and operating improvements to help maximize cash flow, higher gold prices this year have shaped the conversation around what to do with these new cash levels.

For some companies, paying down debt still remains a priority. For firms currently building new mines, the higher cash flows provide welcomed cushion and remove market concerns over financing. Most companies also expect dividends to resume and/or increase as free cash flow grows. But for most companies, higher cash flows, at a time when balance sheets are in good shape and costs are under control, will likely bring back the opportunity to add future growth.

Valuations are still relatively low, so there is opportunity to buy assets. Exploration spending, which had been significantly reduced over the last couple of years, should also pick up again, allowing companies to add resources and reserves and increasing their chances of finding new discoveries. Projects that have been shelved will be revisited as financing becomes available. We met with management teams that despite the higher gold price, and higher cash flows that come with it, remain firmly committed to growing profitability and returns rather than production. We heard more than once in our discussions, that a new ounce of production is only good and will only be added if it improves or maintains the existing per ounce profitability of the company. Companies are measuring growth in free cash flow per share, for example, rather than production volumes.

This is very encouraging to us. Company initiatives have slowly and cautiously started to shift from mere survival to thriving. Cautiously is the key word here. As they embark on what may be the next gold bull market, we believe gold companies need to continue to demonstrate a rigorous capital allocation strategy that focuses on value creation for shareholders and positions the gold mining equity sector in the investable universe of the broader market.

by Joe Foster, Portfolio Manager and Strategist

With more than 30 years of gold industry experience, Foster began his gold career as a boots on the ground geologist, evaluating mining exploration and development projects. Foster is Portfolio Manager and Strategist for the Gold and Precious Metals strategy.

1In the U.S., the federal funds rate is “the interest rate” at which depository institutions actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis. Institutions with surplus balances in their accounts lend those balances to institutions in need of larger balances. 2The correlation coefficient is a measure that determines the degree to which two variables’ movements are associated and will vary from -1.0 to 1.0. -1.0 indicates perfect negative correlation, and 1.0 indicates perfect positive correlation. 3U.S. Dollar Index (DXY) indicates the general international value of the U.S. dollar. The DXY does this by averaging the exchange rates between the U.S. dollar and six major world currencies: Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish kroner, and Swiss franc. 4The ISM Manufacturing Index is an index based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production inventories, new orders and supplier deliveries. 5A survey of consumer confidence conducted by the University of Michigan. The Michigan Consumer Sentiment Index (MCSI) uses telephone surveys to gather information on consumer expectations regarding the overall economy. 6The U.S. consumer confidence index (CCI) is an indicator designed to measure consumer confidence, which is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. 7NYSE Arca Gold Miners Index (GDMNTR) is a modified market capitalization-weighted index comprised of publicly traded companies involved primarily in the mining for gold. 8MVIS Global Junior Gold Miners Index (MVGDXJTR) is a rules-based, modified market capitalization-weighted, float-adjusted index comprised of a global universe of publicly traded small-and medium-capitalization companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver.

Please note that the information herein represents the opinion of the author and these opinions may change at any time and from time to time.

Important Information For Foreign Investors

This document does not constitute an offering or invitation to invest or acquire financial instruments. The use of this material is for general information purposes.

Please note that Van Eck Securities Corporation offers actively managed and passively managed investment products that invest in the asset class(es) included in this material. Gold investments can be significantly affected by international economic, monetary and political developments. Gold equities may decline in value due to developments specific to the gold industry, and are subject to interest rate risk and market risk. Investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation.

Please note that Joe Foster is the Portfolio Manager of an actively managed gold strategy.

Any indices listed are unmanaged indices and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.

1U.S. Dollar Index (DXY) indicates the general international value of the U.S. dollar. The DXY does this by averaging the exchange rates between the U.S. dollar and six major world currencies: Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish kroner, and Swiss franc. 2NYSE Arca Gold Miners Index (GDMNTR) is a modified market capitalization-weighted index comprised of publicly traded companies involved primarily in the mining for gold. 3MVIS Global Junior Gold Miners Index (MVGDXJTR) is a rules-based, modified market capitalization-weighted, float-adjusted index comprised of a global universe of publicly traded small- and medium-capitalization companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver. 4Fannie Mae (Federal National Mortgage Association); Freddie Mac (Federal Home Loan Mortgage Corporation)

Please note that the information herein represents the opinion of the author and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results; current data may differ from data quoted. Current market conditions may not continue. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck. ©2016 VanEck.

 

Global risks to lift gold prices higher

Global risks to lift gold prices higher

ETF Securities Weekly Flows Analysis – Global risks to lift gold prices higher

  • Gold ETPs garner inflows as dismal payroll data diminishes the probability of a June rate hike.
  • Oil ETPs recorded outflows for the eighth consecutive week after a lacklustre OPEC meeting.
  • Longer dated commodity basket ETPs receive 2nd highest inflows in 2016.

Download the complete report (.pdf)

Gold ETPs recorded second largest weekly outflows in 2016 as prices retreat near its 2 months low. In line with the hawkish Federal Open Market Committee (FOMC) minutes report released on the 18th of May, Federal Reserve (Fed) officials have also been hinted in their speech on a higher probability for the Fed to hike rates again in June amidst concerns over the UK Brexit. However, the odds, derived from reading of the Fed Fund Futures, remain low, at 30%, highlighting that the uncertainty over the Fed next month move will likely continue to weigh on the metal price until then. The US dollar, on the other hand, rose 2.7% over the past month adding to the current downward pressure on commodities. In our model, we estimate the fair value of gold at US$1,250/oz. for year end 2016, assuming an inflation of 2% in the US and speculative net positioning falls back to 75,000. We, therefore, believe that the current price level should be seen as a potential buying opportunity for investors.

Oil ETPs recorded outflows for the seventh consecutive week as prices continue to recover. Oil prices rose 1.6% last week, trading above the US$50/bbl. for the first time since November 2015. As a result, oil ETPs recorded outflows for the seventh consecutive week, mainly out of WTI crude ETPs. While the US oil benchmark currently trades slightly below its European peers, investors fear that US shale oil production may return faster than expected, capping the potential gain on the WTI crude price while Brent crude should continue to benefit from depleting oil production in the North Sea. US crude stockpiles fell more than expected in the latest US Energy Information Administration (EIA) report as US oil production continued to decline at the same time, lending support to oil prices. We believe next week’s OPEC meeting will not have any meaningful impact on the global oil market. Both the International Energy Agency (IEA) and the US EIA raised their global demand growth forecast for 2016 to 1.4 million barrels per day on higher demand from China and India.

Industrial metals ETPs have been enjoying net inflows of US$38mn in 2016. While flows remain highly volatile from one week to another, the momentum is building up as industrial metals ETPs were the only commodity sector posting positive flows last week. Investor interest has traditionally been focussed on copper and aluminium ETPs. We however note that recent flows trends suggest a more diversified exposure across the sector with nickel ETPs actually recording positive flows over the past year. Increasing signs that China economy is stabilising combined with continued capex cuts from miners should eventually support industrial metals prices.

Key events to watch this week. A number of manufacturing and non-manufacturing PMIs are due over the course of the week along with retail sales and confidence data. While the European Central Bank will decide on its interest rate policy on Thursday, investors will also be waiting for labour market data for May from key countries, above all the US non-farm payroll on Friday.

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.

Risk aversion sees oil and gold prices diverge

Risk aversion sees oil and gold prices diverge

Commodity ETP Weekly – Risk aversion sees oil and gold prices diverge

Brent trades at its biggest discount to WTI.
Gold safe haven status reignited.
Coffee ETPs receive their highest inflows since July 2015.

  • Bargain hunters continue to drive flows into energy ETPs, extending last year’s trend for a second week in 2016 despite the oil price slide.
  • Gold ETPs flows hit 9-week high at the start of 2016 as uncertainty over global markets looms.
  • Coffee ETPs flows garner momentum after International Coffee Organisation raised estimates for global production shortfall.

Download the complete report (.pdf)

Brent trades at its biggest discount to WTI. WTI and Brent crude oil prices have fallen to fresh 12-year lows below US$29/bbl this week. Brent, the North Sea crude used as an international benchmark, has fallen faster than WTI and is trading at its biggest discount to the US benchmark since 2010. The lifting of oil sanctions against Iran this weekend mounted pressure on Brent prices as investors contemplated the effects of rising Iranian exports in an already over supplied oil market. Despite the precipitous oil slide, bargain hunters remained undeterred, driving inflows of US $26.9mn into long Brent ETPs – the highest level since February last year and inflows US $45.6mn in long WTI crude ETPs are at the highest level in 8 weeks.

Gold safe haven status reignited. Gold ETPs recorded their highest inflows in 9 weeks , amounting to US $17.6mn. We believe the simplest explanation for this has been the global stock market rout, exacerbated by Friday’s oil price declines, which renewed gold’s appeal as a safe haven asset. Another key point to highlight is the ripple effect that a lower sticky inflation outlook could have on the Fed’s ability to raise rates in the US this year. Persistently low oil prices could lower the future rate profile compared to the current FOMC dot plot, encouraging a weaker dollar and thereby making gold priced in dollars cheaper to buy. By virtue of oil being a vital part of inflation forces, and given the recent oil price slide subsequent lower inflation would also reduce the need for gold as a hedge against inflation. However, in the current environment, gold’s defensive properties are driving price performance. Gold has posted gains of 1.43% last week highlighting gold’s resilience at a time when market uncertainty is at the highest levels since the global equity correction in September 2015.

Coffee ETPs receive their highest inflows since July 2015. ETFS Coffee (COFF) recorded flows of US$3.5mn after the International Coffee Organisation (ICO) hiked estimates for the global production shortfall this season held back by a weaker harvest in Brazil. In its forecast for the output for 2015-16, the ICO expects the first growth in production in three years. Nonetheless, the ICO forecast a deficit for a third successive season.

Key events to watch this week. After a torrid week in financial markets all eyes will be glued on China’s GDP report due to be released on Tuesday for any signs of respite from the ongoing sell off. Friday sees the release of the US inflation data, a key ingredient to the FOMC’s rate policy formulation and the USD, a key driver of commodity prices. The European Central Bank meets on Thursday and consensus remains for rates to be left unchanged. The Canadian Dollar’s decline to a 12-year low coupled with sliding oil prices may force the Bank of Canada to take further action when they meet on Wednesday.

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.