Investors appear to rotate from gold to silver ETPs

ETF Securities Weekly Flows Analysis – Investors appear to rotate from gold to silver ETPs

Highlights

• Silver ETPs receive highest weekly inflows since January 2015.
• Equity contrarians looking to buy Italian ETFs.
• Long crude oil ETPs saw US$45mn outflows as WTI oil declined the most in 10 weeks.

Download the complete report (.pdf)

Silver ETPs receive highest weekly inflows since January 2015. Silver’s underperformance relative to gold has been correcting in recent weeks. The gold-to-silver ratio has declined to 78 on 25th May from a 2-year high of 82 reached in April. While gold remains under pressure from a rising interest rate environment in the US, silver has the potential to leverage off its industrial’s traits. With global purchasing managers indices seeing improvement in the start Q2, the outlook for industrial demand for silver is looking good. Silver had been in a supply deficit in since 2013 and the lack of capital expenditure in mines in recent years its likely to see that supply deficit persist. Growing demand from electronics (in particular in cars) and photovoltaics bodes well for the metal. Long silver ETPs saw US$97.3mn of inflows last week. Gold ETPs on the other hand saw outflows. Despite gold seeing gains toward the end of the week after the US-North Korea-South Korea summit experienced further turbulence, gold ETPs saw US$63.5mn outflows during the week as gold prices were predominantly falling.

Equity contrarians looking to buy Italian ETFs. The forming of an all-populist coalition government in Italy spooked the market and the FTSE MIB declined a good 4.5% last week. Prior to the events that caused further turmoil over the weekend, ETF investors appear to have sensed a buying opportunity. US$8.2mn of inflows into long FTSE MIB ETFs were the highest since July 2016.

Sugar ETPs saw largest outflows since July 2015 as investors appear to take profit. Sugar prices rose 7% last week as the market reassessed the extent of global over-supply. After a bumper cane crop (and strong crush thereafter), the market was conditioned to think that India would flood the market with high levels of exports. But it appears that India is happy to hold a larger inventory this year. At the same time, less favourable weather is likely to reduce supplies from Brazil and relatively strong oil prices are likely to see a higher amount of cane be diverted to ethanol production rather than sugar. Long sugar ETPs saw US$8.5mn of outflows last week as investors appeared to take profit on the recent price increase.

Investors appear to profit-take on industrial metals. Broad industrial metal prices have risen 1.5% after in the past month, after a period of decline. Investors appear to have taken profit on these moves. US$16.6mn of outflows last week were the highest in eight weeks. While the fundamentals on industrial metals remain supportive, near-term headwinds from an appreciating US Dollar could cap price gains.

Long crude oil ETPs saw US$45mn outflows as WTI oil declined the most in 10 weeks. WTI oil prices fell 5% last week as OPEC and Russia signalled they are ready to increase supply. It is not clear by how much they will increase production or to what extent the 14 member group (and 10 non-OPEC countries participating in the voluntary production adjustments) even agree with reducing production curbs. We expect more clarity after the 174th OPEC meeting scheduled on 22nd June.

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.