Etikett: Nitesh Shah

Bargain Hunting Drives Precious Metal Flows to Eight-Week High

Bargain Hunting Drives Precious Metal Flows to Eight-Week High

Commodity ETP Weekly Bargain Hunting Drives Precious Metal Flows to Eight-Week High

ETFS Physical Platinum (PHPT) sees largest inflows since 2012 while ETFS Physical Palladium (PHPD) sees highest inflows since May 2014.

Record inflows into ETFS Aluminium (ALUM).

Silver ETPs see highest inflows since February 2014.

Gold ETPs see first outflow in five weeks as prospects for global growth improve.

As the price of WTI fell below US$78/bbl for the first time in 3 years, flows into long WTI ETPs rose to US$24.8mn, the highest level since March 2014.

 

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While precious metal prices capitulated last week, we saw strong flows into platinum, palladium and silver. Bargain hunting is clearly driving flows. With the global industrial cycle improving, demand for the more industrially dependent precious metals is likely to rise and therefore help reverse the losses these metals have sustained due to their correlation with gold. With all precious metals trading near or below their marginal cost of production, we expect mining activity to begin to be cut back, tightening supply, and supporting prices

ETFS Physical Platinum (PHPT) sees largest inflows since 2012 while ETFS Physical Palladium (PHPD) sees highest inflows since May 2014. US$45.4mn of flows into PHPT and US$38.9mn into PHPD highlights just how attractive investors think platinum group metals (PGMs) are right now. With their ubiquitous use in auto-catalysts and rising car demand in the US, China and Europe, demand for PGMs remains strong. Meanwhile unprofitable mines in South Africa are likely to continue to be shut down and the stability of exports from Russia is likely to remain a concern, which will eventually lead to upward price pressure.

Record inflows into ETFS Aluminium (ALUM). At US$96.9mn, last week’s inflow was the highest since the inception of ALUM in 2006. After years of depressed aluminium prices, in 2014 we have seen aluminium rise close to 19% year-to-date. Even last week when most other metal prices fell, aluminium gained 1.9%. The catalyst behind the rally has been the tightness in bauxite supply, a key input for aluminium production, following Indonesia’s ban on raw mineral exports. Over-production of aluminium in China is likely to be cut in 2015 as the government pulls back from continuously subsidising loss-making smelters, especially now given the tightness in the bauxite market.

Silver ETPs see highest inflows since February 2014. After falling close to 9% last week, silver prices reached the lowest levels since 2012. Relative to gold it is the cheapest it has been since 2009, despite the recent declines the gold price. The upturn in the industrial cycle bodes well for the silver and we could see the excess supply slowly be absorbed. Inflows into silver ETPs totalled US$35.7mn last week.

Gold ETPs see first outflow in five weeks as prospects for global growth improve. US economic growth in particular looks buoyant and is likely to drive the US dollar even higher, placing downward pressure on gold in dollar terms. Gold fell 4.7% last week and the pressure on the metal could remain. We saw US$85.8mn of outflows, reversing the previous four-weeks of inflows as more investors became bearish on the metal’s prospects.

As the price of WTI fell below US$78/bbl for the first time in 3 years, flows into long WTI ETPs rose to US$24.8mn, the highest level since March 2014. The price of the WTI reacted strongly to the news that Saudi Arabia had cut prices in the US. While the OPEC cartel appears to be in disarray, with the smaller members undercutting each other’s prices in Asia, we note the cartel has survived since 1960 despite the turbulence the member countries have endured since that time. We believe the November 27th meeting could be a pivotal point to sharpen the group’s common interests, likely driving the price of oil back to levels consistent with balancing OPEC government budgets, above US$90/bbl.

Key events to watch this week. A number of Chinese data releases including industrial production and loan growth will help investors gauge the strength of likely demand from the world’s largest consumer of commodities. Meanwhile the advance release of Q3 GDP from the Euro area could give an indication of the (lack of) strength of demand elsewhere.

Video Presentation

 

Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

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.

Commodities Continue To Attract Investor Attention

Commodities Continue To Attract Investor Attention

Highlights Commodities Continue To Attract Investor Attention

Inflows into physical gold reach six week highs

Bargain hunting drives US$12.3mn into long crude oil ETPs, a seven week high

ETFS Daily Leveraged Natural (LNGA) attracts US$9.mn as Henry Hub prices slide 4.6%

ETFS Platinum Trust (PPLT) sees largest outflow since March on profit-taking

An 11% decline in coffee prices led to profit-taking for ETFS Daily Short Coffee (SCFE)

 

Download the complete report (.pdf)

 

 

Commodity ETPs saw their largest inflows in six weeks, with bargain-hunters attracted by depressed valuations. Several commodities including Brent, platinum, palladium and most industrial metals rose last week rebounding on the back of the better investor sentiment toward commodities. With many commodities trading so close to their marginal cost of production, we believe that prices cannot fall much lower without triggering a supply response. Better-than-expected GDP and industrial production data from China, the world’s largest consumer of commodities, also helped boost cyclical commodity prices.

Inflows into physical gold reach six week highs. There was US$22.6mn of inflows into physical gold last week as the price of the metal fell a further 0.4%. With gold trading just above our estimated marginal cost of
production (US$1,100/lb), a natural floor to the metal appears to have been reached.

Bargain hunting drives US$12.3mn into long crude oil ETPs, a seven week high. After reaching a 5-year low the previous week, Brent oil, recovered 2.8% last week. WTI on the other hand continued to slip 0.7%. At bargain prices, ETP investors bought into crude, with US$5.1mn flowing into long Brent ETPs and US$7.2mn into long WTI ETPs. According to media reports (although not confirmed officially), Saudi Arabia cut supplies by 328,000 barrels a day in September to 9.36 million barrels a day. Ample supply has been weighing on prices and if confirmed, Saudi’s moves could help prices recover further.

ETFS Daily Leveraged Natural (LNGA) attracts US$9.mn as Henry Hub prices slide 4.6%. Natural gas prices fell as working gas in storage rose 94Bcf last week. Storage values however remain 9.0% below year-ago levels and 9.1% below the 5-year historical average. Natural gas is a commodity that is highly sensitive to changes in weather that experience sharp supply drawdowns and investors are betting on a price rebound ahead of winter peak demand.

ETFS Platinum Trust (PPLT) sees largest outflow since March on profit-taking. Platinum rose 1.5% last week driving a US$6.1mn redemption from PPLT. Anglo American Platinum (Amplats) disclosed that the five-month strike earlier this year had cost the company 424,000 ounces in lost production and it lost a further 108,000 ounces in the subsequent ramp-up. However, it also confirmed it has resumed production a month ahead of schedule, which could cap gains in the near-term.

An 11% decline in coffee prices led to profit-taking for ETFS Daily Short Coffee (SCFE). US$2.2mn was redeemed from SCFE, marking the highest outflow from the short coffee ETP since May. The violent price moves have polarised investors with US$1.6mn flowing into ETFS Daily Leveraged Coffee (LCFE) last week – the highest in six weeks. Drought and irregular rain in Brazil, the world’s top producer has hurt the prospect for the 2015 crop. However, with rains resuming, the flowering process has started for the 2015 crop, but analysts are divided in their opinion as to the extent the earlier disruptions will damage the crop.

Key events to watch this week. All eyes will be on the Federal Reserve’s policy meeting in which the central bank is expected to announce the end of its asset buying programme. Any extension of its programme could trigger a rally in gold prices as currency debasement fears linger for longer. Weighing on investors’ minds is the prospect of rate rises, which we expect to occur in H1 2015. Investors will listen for cues from the Fed on this front.

Video Presentation

 

Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

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.

Commodities at a Turning Point?

Commodities at a Turning Point?

Highlights Commodities at a Turning Point?

Gold ETPs saw first inflow in five weeks
Agricultural basket ETPs saw their largest inflows since January 2013
ETFS Daily Leveraged Natural Gas received US$10.0mn of inflows, the highest since February 2014
Price gains in industrial metals attracted flows into copper, while driving profit-taking elsewhere

 

Download the complete report (.pdf)

 

Most commodity prices bounced back last week, attracting flows into a diverse range of commodity ETCs from gold to agricultural baskets. Gold ETPs saw their first inflows in a month as dovish Federal Open Market Committee minutes led to dollar weakness, while weak German data renewed interest in the hard defensive assets. With the exception of cocoa, all agricultural prices rose last week. Agricultural baskets saw their largest inflows in 20 months, bringing the year-to-date flows into agricultural baskets into positive territory for the first time since April 2014.

Gold ETPs saw first inflow in five weeks. Gold ETPs received US$18.3mn of inflows last week as the price of gold rose 1.2% in US dollar terms, amid US currency weakness following the dovish Federal Reserve meeting minutes release. With gold prices having fallen close to the marginal cost of production and speculative futures market shorts positions having risen close to all-time highs, last week’s bounce could trigger a short-covering rally helping to sustain momentum in the upward trend. Additionally weak data from Germany unscored the fragile state of the Euro area, bolstering the case for further easing from the European Central Bank, which may strengthen demand for gold as a monetary metal. At the same time physical demand for the gold is likely to see a seasonal lift from the upcoming Diwali celebrations in India (23rd October).

Agricultural basket ETPs saw their largest inflows since January 2013. In particular, with US$22.7mn of inflows, ETFS Agriculture (AIGA) saw its largest inflow since inception (2006). That marks a decisive change in sentiment toward agricultural commodities, where speculative futures market shorts for wheat, corn, soy and sugar have risen to near-record highs amid bumper crop expectations. Corn prices rose 6.8% last week as US exports for the crop picked up strongly. Wheat ETPs saw their first outflow in 21 weeks. Investors had been steadily building positions in wheat as the price slid to the lowest level since 2010. Last week’s 2.2% bounce in price led to some profit-taking.

ETFS Daily Leveraged Natural Gas received US$10.0mn of inflows, the highest since February 2014. While most commodity prices rose last week, energy prices bucked the trend. With US natural gas prices falling a further 3.8% last week, investors bought leveraged exposure, expecting a seasonal increase in demand to shake out the bearish sentiment toward the commodity. Price gains in industrial metals attracted flows into copper, while driving profittaking elsewhere. With the exception of tin, all industrial metal prices rose last week.

ETFS Copper (COPA) received its first inflow in six weeks. Meanwhile profit taking saw US$11.1mn of outflows from ETFS Aluminium (ALUM), adding to the US$59.9mn of outflows the previous week, reversing all of the strong inflows we saw in July and August. ETFS Zinc (ZINC) saw US$2.9mn of outflows, the largest in eight weeks.

Key events to watch this week. A raft of Chinese economic data releases will help investors gauge the strength of the economy that drives the bulk of commodity demand globally. Chinese trade, loan growth, money supply growth, inflation and FX reserves growth data are due to be released next week. US retail sales will be closely watched as the Fed assesses the capacity of the US economy to accommodate rate increases next year.

Video Presentation

 

Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

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.

Prepare for Short-Covering Rallies

 Prepare for Short-Covering Rallies

Commodity ETP Weekly Prepare for Short-Covering Rallies

ETFS Daily Short Gold (SBUL) saw its highest redemption since inception.
Inflows of US$6.8mn for long agricultural ETP baskets indicates that investors see value in grains after falling to their lowest price levels since 2010.
ETFS Daily Leveraged Natural Gas (LNGA) saw US$4.6mn of inflows, the highest in 9 weeks, as storage values came under expectations.
Long nickel ETPs received US$1.4mn of inflows as the Indonesian government reiterated that the ore export ban from will remain.

Bargainhunting investors are beginning to be attracted by lower commodity prices, with positive flows into agricultural baskets and silver signaling a belief that the bottom is near. Nonetheless, most commodity prices continued lower in the past week and softer sentiment in some sectors prompted outflows. Gold remained under pressure last week, with all indications that the Federal Reserve’s policy stance will be tighter in 2015. Ongoing concern over the outlook for China also weighed on the performance of industrial metals and industrially-inclined precious metals. We believe that with speculative shorts across many commodities having risen to multi-period highs, the prospect for short-covering rallies is high. Over the coming weeks, investors are likely to start building long positions with most commodity trading at or near the cost of production.

ETFS Daily Short Gold (SBUL) saw its highest redemption since inception. After a protracted period of building up shorts on gold, investors pulled back as the price of gold approaches our estimated all-in cost of production and the widely watched support level near US$1,200/oz. US$47.7mn flowed out of SBUL, wiping out the seven months of flows into the short product. While investors continued to pare their long gold positions as well, with US$51mn leaving physical gold ETPs last week, taking further bets on a decline in price seems risky at this point.

Inflows of US$6.8mn for long agricultural ETP baskets indicates that investors see value in grains after falling to their lowest price levels since 2010. Marking the highest inflow in 9 weeks, we believe that sentiment is slowly turning. Investors have been buying wheat ETPs for 19 consecutive weeks now and there is a growing sense that all ‘good’ production news has now been priced in. Meanwhile sugar prices bounced up 6.6%, attracting a further US$0.9mn into ETFS Sugar (SUGA), marking 8 consecutive weeks of flows into the ETP. Sugar remains close to a 4-year low as the fifth consecutive year of surplus is expected this year.

ETFS Daily Leveraged Natural Gas (LNGA) saw US$4.6mn of inflows, the highest in 9 weeks, as storage values came under expectations. US natural gas stocks increased by 97 billion cubic feet in the week ending September 19. That compared with an expected increase of about 100 billion cubic feet anticipated by analysts and sent prices 1.6% higher last week. As we approach winter, seasonal demand for natural gas will rise. A failure to build inventory or an unusually cold winter like last year could be key catalysts for sustained price increases.

Long nickel ETPs received US$1.4mn of inflows as the Indonesian government reiterated that the ore export ban will remain. Indonesia, the world’s largest nickel producer, had implemented the ban in January this year and has unusually stuck to it in a bid to develop domestic smelting facilities. Nickel prices nevertheless fell, along with other industrial metals on the back of softer-than-expected PMIs and durable goods data.

Key events to watch this week. US payrolls will be the centre of attention this week as the market judges the capacity of the US economy to absorb an interest rate hike that will eventually follow when the Fed finishes its period of extraordinary monetary support. A strong reading is likely to be US dollar positive and weigh on commodities priced in the currency. After the lacklustre take-up of the TLTRO (the ECB’s form or quantitative easing), the market will be keen to hear President Draghi’s view of the programme at the ECB’s post-policy meeting conference.

Download the complete report (.pdf)

 

Video Presentation

Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

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.

Oil and Gold Remain Top Trades as Bargain Hunting Drives Inflows

Oil and Gold Remain Top Trades as Bargain Hunting Drives Inflows

Commodity ETP Weekly, Oil and Gold Remain Top Trades as Bargain Hunting Drives Inflows

Highlights

Bargain hunting drove US$7.4mn into long oil ETPs, marking the longest stretch of weekly inflows since 2012.

Long wheat ETPs saw their 17th consecutive week of inflows as investors mounted bets on a less bearish USDA report.

Concern over China and supply prompted another week of outflows in industrial metal ETPs, marking the largest cumulative four week outflow since May 2013.

Gold and oil ETPs both respectively saw their 9th consecutive week of inflows. The price of gold and oil has fallen in recent weeks, in part reflecting a reduction in the geopolitical premium following a ceasefire agreed by Ukraine and Russia. Bargain hunting investors have chosen to increase their holdings of oil with its price looking particularly attractive, with both Brent and WTI oil benchmarks trading below US$100/bbl. We believe OPEC is likely to cut production if demand for oil continues to remain weak, which will in turn help support prices. Despite weakness in gold prices, investors have generally maintained holdings over the past few months. Daily flow data however indicates that some investors are losing patience with gold in recent days and its weak price could test the endurance of some investors if the relatively stable geopolitical situation lasts.

Bargain hunting drove US$7.4mn into long oil ETPs, marking the longest stretch of weekly inflows since 2012. Although bets weren’t completely one-sided, with US$2.7mn of inflows into short oil ETPs, many investors are doubtful that the current weakness in oil price can persist. Weak global demand for oil products this summer, combined with the limited impact of geopolitical risks on OPEC and Russian oil supply sent both Brent and WTI prices to multi-month lows. With production reaching multi-decade highs, US oil inventories had remained above its 5-year range until very recently and stockpiles at Cushing have been slowly rebuilding. While Chinese oil imports and the US summer driving season have not been as supportive of oil demand as expected, the US Energy Information Agency (EIA) is forecasting a supply deficit for the second half of 2014 and OPEC is anticipating a pick-up in global oil demand during the remaining months of 2014. Should that pick-up in demand not materialise, we believe that OPEC will cut production from its current target of 30mb/d.

Long wheat ETPs saw their 17th consecutive week of inflows as investors mounted bets on a less bearish USDA report. After months of successive production and stock upgrades, some investors thought that last Thursday’s World Agricultural Demand and Supply Estimate report would show some stabilisation. It turns out that they were disappointed. The price of wheat fell 4.2% last week alone and is now trading at the lowest level since 2010. With wheat priced for perfect growing conditions, any small hiccup in weather in major producing countries or an escalation in trade restrictions could drive a price rally. More bargain hunting is likely with prices at multi-year low levels.

Concern over China and supply prompted another week of outflows in industrial metal ETPs, marking the largest cumulative four week outflow since May 2013. Last week, US$9.1mn was redeemed from ETFS Industrial Metals (AIGI) basket and most long industrial metal ETPs saw outflows. Long copper ETPs in particular saw US$18.6mn of outflows. Industrial metal prices declined as jitters over the health of Chinese demand troubled investors and the probability of the Philippines following Indonesia’s lead in banning ore exports has lessened. By the end of the week, however, China reported strong credit growth for the past month, which should go a long way to ease concerns about its ability to drive demand for commodity-intensive house building and infrastructure construction.

Key events to watch this week. The Federal Reserve’s FOMC meeting will be the focus of market attention. The US central bank is expected to continue to taper its bond-buying programme at the current rate, which will only leave another meeting (after this week’s) before it announces a stop to more purchases. After a disappointing US payrolls report, the market will watch out for any changes in forward guidance that could signal rate changes slower than current market expectations.

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Video Presentation

Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

For more information contact:

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

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