ETF Securities Weekly Flows Analysis – Gold and the US Dollar back in favour
- Gold and the US Dollar back in favour.
- Gold inflows rebound to the highest levels in 16 weeks, and the fourth consecutive week of inflows.
- Emerging market bonds see largest inflows in eight weeks.
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Emerging market bonds received largest inflows in eight weeks. Emerging government bond ETPs recorded inflows of US$22mn last week, as investors continued to look to EM space for better returns. Higher yielding EM bond ETPs have now posted the third consecutive week of inflows.
Profit taking in short JPY ETPs reaches the highest level since April 2016. Investors have reduced positions to the US Dollar against the Yen for the twelfth consecutive week, as the steep decline in the Yen appears to have lost momentum. Conflicting statements from incoming US Government policymakers have forced the dollar to trade a volatile range against the Yen over the past few weeks, with outflows from ETPs giving short exposure to the Yen against the Dollar totalling US$13.8mn last week.
Record inflows betting against commodity currencies, totalling US$7.4mn. Amid hawkish comments from Fed Chair Yellen and concern that President Trump’s policies could exacerbate a Chinese growth slowdown, investors have funded record positions in favour of the US Dollar and against a basket of commodity currencies (Australian Dollar, Norwegian Krone, Canadian Dollar and New Zealand Dollar.) Bolstering such a trade is that oil prices remain near the top of recent ranges and with increasing production in the US, downside risk remains elevated.
Agricultural commodities received the largest inflows in six weeks, totalling US$18.3mn. Of the inflows, diversified basket exposures accounted for 21%, wheat 22% and cocoa 49%. The trend toward diversified investing hasn’t been confined to agriculture alone: over the past month, the most significant inflows into the energy, industrial metal and livestock sectors have been via diversified basket ETPs. Bargain hunting appears to be the driver for cocoa, as it has been the worst performing agricultural commodity over the past year, and the only one to post a negative return over the past month.
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