Massive gold inflows despite hawkish Fed minutes and stronger US dollar
ETF Securities Weekly Flows Analysis – Massive gold inflows despite hawkish Fed minutes and stronger US dollar
- Many investors took advantage of the gold prices slide that followed the release of the Fed minutes.
- The rebound in oil prices did not ease profit-taking in energy ETPs.
- Coffee ETPs face outflows as Arabica yields suggest a generous harvest and the Brazilian real depreciates against the US dollar.
Download the complete report (.pdf)
Oil ETPs outflows continue on profit taking as prices recover. Oil prices rose 1.5% this week on the expectations for lower US crude inventory and additional oil production disruptions in Canada, Libya and Nigeria. However, the strengthening of the US dollar and the unexpected 1.3mn barrel increase in US crude inventory over the previous week, according to the U.S. Energy Information Administration (EIA), swayed the rally. The temporary supply outages were mostly offset by the increase of US crude inventory which resulted in the sixth consecutive week of profit taking in oil ETPs. Global oil markets remain over-supplied from low winter heating demand in the US and Europe resulting in high inventories, and data from Iran shows oil exports are increasing faster than expected.
Palladium ETPs recorded largest weekly inflows since July 2015. Last week saw US$5.1mn inflows into palladium ETPs as prices lost another 6.9% to US$565/oz. We believe palladium will likely be the outperformer this year. Like platinum, palladium has been in a supply deficit for the past four years and is forecast to remain in deficit for 2016 as demand from the automotive sector is expected to rise 4% this year. Other industrial precious metals also registered positive flows: US$5.7mn for silver and US$1.4mn for platinum.
Coffee ETPs registered outflows of US$10mn, as the price of coffee dropped by nearly 3.3% this week. While the coffee cropping season has just started, the US Department of Agriculture reported that Brazil (the world’s largest coffee producer) will crop 56mn of 60-kg bags this year, up 13% from last year. The prospect of higher supply as well as the depreciation of the Brazilian real against the US dollar explains most of the decline in coffee export prices.
Key events to watch this week. The release of the second estimate of US GDP in the first quarter might be the biggest market mover next week. Market participants expect an upward revision to 0.8%qoq annualised from 0.5% in the first estimate. If we do see this upward revision, the odds for a rate hike in June could rise sharply. The Flash estimates of May PMIs in the US, Europe and Japan, will also be highly followed by market participants. Finally, the first estimate of GDP growth in the first quarter in the UK could trigger market stress in the context of intense Brexit debates.
Video Presentation
Morgane Delledonne, Fixed Income Strategist 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.