Etikett: Precious metals

Global Commodity ETP Quarterly Q3 2014

ETFSCommQ320141 Global Commodity ETP Quarterly Q3 2014Global Commodity ETP Quarterly Q3 2014

Global Commodity ETP Quarterly Q3 2014 The report includes:

  1. A comprehensive and fully up-to-date reference guide to investing in global commodity ETPs and indexes – no ETP type or geographic area is excluded. The report details the large and growing choice of commodity ETP exposures and strategies around the world.
  2. Summary analysis of global commodity ETP flows, trading volumes and AUM trends. Includes a detailed analysis of the main trends in Q3 2014 and the outlook for the rest of the year.
  3. Roll yield analysis (contango/backwardation) broken down by individual commodity and commodity sectors.
  4. Useful fundamental commodity data and information. An updated and revised inventory trends section, positioning data, futures curve developments, commodity index compositions and weights.

 

Click here to download the complete report (.pdf)

 

Throughout the Global Commodity ETP Quarterly, commodity ETPs have been grouped into six main sectors as detailed below:

  • Diversified Broad contains Diversified Broad, Diversified Broad ex Agriculture and Livestock, Diversified Broad Light Energy and Diversified Broad ex Energy basket commodity ETPs
  • Agriculture contains Diversified Agriculture basket, Cocoa, Coffee, Corn, Cotton, Grains, Rice, Softs, Soybeans, Soybean Meal, Soybean Oil, Sugar and Wheat commodity ETPs
  • Energy contains Diversified Energy basket, Biofuels, Carbon, Coal, Crude Oil, Electricity, Gasoline, Heating Oil, Natural Gas and Petroleum commodity ETPs
  • Industrial Metals contains Diversified Industrial Metals basket, Aluminium, Copper, Lead, Nickel, Tin, Uranium and Zinc commodity ETPs
  • Livestock contains Diversified Livestock basket, Feeder Cattle, Lean Hogs and Live Cattle commodity ETPs
  • Precious Metals contains Diversified Precious Metals basket, Gold, Palladium, Platinum, Rhodium and Silver commodity ETPs Exchange Traded Products (ETPs) is the umbrella term covering Exchange Traded Funds (ETFs), Exchange Traded Commodities (ETCs), Exchange Traded Notes (ETNs), US Limited Partnerships (LPs), US Guarantor and other statutory trusts. Commodity ETPs are open-ended securities listed on a stock exchange tracking an underlying commodity asset. They do not include ETPs tracking the listed equities of companies involved in commodity businesses.

If not otherwise stated, all data in the publication is in US dollars.

 

Commodity ETP Flows Resilient in the Face of Price Declines

 

Summary

 

Commodity ETPs were hit hard in Q3 2014 as a strong US dollar and concerns about China and Europé growth knocked many commodity prices down towards their production costs.

Following two consecutive quarters of increases, commodity ETP assets under management (AUM) fell by US$12.6bn to US$110.7bn, the lowest level since Q1 2010. However, close to 96% of the AUM decline was caused by price declines, with net investor outflows during the quarter a relatively resilient US$550mn.

The resilience of investor flows likely reflects a number of factors. The first is that most of the large, leveraged tactical players in commodity ETPs cleared their positions in 2013, as reflected in the large outflows that year. The bulk of investors in commodity ETPs today tend to be strategic investors with medium to long-term time horizons who tend to be less sensitive to short term price swings.

A second key factor is that with most commodities now trading near (and in some cases below) their estimated all-in or marginal costs of production, many investors with long-term investment horizons are looking at current prices as attractive accumulation levels on the view on-going production cuts and a steady structural rise in demand from increasingly wealthy large population developing countries will ultimately push prices higher.

Lastly, a large part of the commodity price declines over the past month or so has been driven by the strong rally in the US dollar and concerns about slower growth in China and Europe. US dollar strength is being driven by healthy US economic growth – a positive for commodity demand. Meanwhile, policy-makers in both China and Europe have started – and are expected to continue – to react strongly to recent signs of economic weakness.

Given the above potential positive price catalysts and the fact that many commodities are trading at their lowest levels relative to their production costs since the crisis of 2008, there are some signs tactical investors are beginning to nibble – particularly with valuations across a number of major equity and most fixed income markets looking stretched. Over the course of Q3, broad commodity index ETPs saw inflows as well as some of the more bombed out individual commodities and sectors such as agriculture, select industrial metals and natural gas.

Key Trends

 

Gold ETPs accounted for nearly 60% of the decline in global commodity ETP AUM, with AUM dropping by US$7.4bn to US$69bn. Of the AUM decline, 82% was due to the gold price decline over the quarter. While investors sold into the price decline, selling was far more muted than during the price declines of 2013, indicating most tactical investors have already exited.

 

 

After gold, platinum and palladium saw the largest outflows in Q3, with US$194mn and US$74mn of outflows respectively. Silver ETPs saw the largest inflows in Q3, with US$452mn of net new investor flows despite (or perhaps because of) the sharp price decline. Many investors appear to view the silver price below US$20/oz as a good long-term accumulation level.

 

 

Agriculture ETPs also saw inflows during the quarter as low prices brought investors into most of the grains as well as cotton.

 

Broad commodity index tracking commodity ETPs saw inflows of US$561mn in Q3 2014, indicating strategic investors are starting to view commodities as a more attractive asset class as equity and bond market valuations have become more stretched and commodity prices have declined.

 

Oil ETPs saw strong inflows in August as prices lurched lower, however in September these flows reversed as it appears some investors capitulated in the face of continued price declines. For the quarter as a whole oil ETPs saw US$83mn of outflows. Meanwhile as the natural gas fell from its heights investors started to nibble, with US$21 of inflows

 

Industrial metal ETPs saw mixed flows, with the net result a very modest US$29mn of inflows into the sector. While copper ETPs saw US$29mn of outflows, aluminium, nickel and industrial metal basket ETPs all saw inflows.

 

Summary and Outlook

 

Assuming the US maintains its current economic trajectory, the key to commodity performance and flows through the rest of 2014 and into 2015 will be how successful both Europe and China are in restimulating their economies. Stronger economic growth in both of these major markets would not only help boost commodity demand and improve general sentiment, but also likely take some of the steam out of the very strong recent US dollar rally (which has been as much about weakness abroad as strength at home) that has been weighing on commodity performance. Increasingly aggressive easing moves by ECB President Mario Draghi and policy-makers in China in the coming months and quarters could be the stimulus commodity markets have been waiting for.

Click here to download the complete report (.pdf)

 

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

 

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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 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.

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.

China Growth Concerns and Strong Dollar Hit Commodities

China Growth Concerns and Strong Dollar Hit Commodities

China Growth Concerns and Strong Dollar Hit Commodities Commodity ETP Weekly

Highlights

  • Diminishing global risks and US Dollar strength weigh on precious metals.
    Oil ETPs see 10th week of inflows as investors view current price levels attractive.
    Wheat ETPs record 18th consecutive week of inflows as price falls to 4-year low.

 

Download the complete report (.pdf)

Concerns about China’s growth outlook, stagnation in Europe and easing geopolitical tensions in the Black Sea region weighed on commodity performance and drove outflows from commodity ETPs last week. Precious metals saw the largest outflows in over a year, with silver and both long and short gold ETPs seeing outflows. The trades are not all one way, however, with the price correction attracting bargain hunters into oil and wheat. Most of the factors that have hit commodity prices over the past few weeks are temporary, and present interesting opportunities for medium to long-term investors in our view. As China eases to boost growth, the US economy recovers, and years of gradually tightening capacity starts to push up inflation, we believe commodity prices – particularly those most tightly linked to the industrial cycle – should recover from current beaten down levels.

Diminishing global risks and US Dollar strength weigh on precious metals. Precious metals saw US$263mn of outflows last week, with gold (both long and short) and silver ETPs seeing the largest outflows. Disappointing economic data from China and Europe weakened demand for the industrial precious metals, with US$17mn flowing out of palladium ETPs. In our view, the price declines are excessive based on our fundamental outlook, with silver, platinum and palladium likely to benefit most if China and US growth continue to recover as we expect. Gold closed just above our estimated all-in cost of production and the widely watched support level near US$1,200/oz. While the strengthening US dollar has weighed on gold in US dollar terms, it has fared much better in Euro terms. We view the current gold price as a very attractive entry point for longer-term investors.

Oil ETPs see 10th week of inflows as investors view current price levels attractive. Oil ETPs saw the 10th consecutive week of inflows last week, bringing total inflows over the period to US$192mn, as investors view current price levels as an attractive entry point. While the International Energy Agency revised down its forecast on global oil demand for 2014 and 2015, demand is still expected to strengthen in Q3/Q4 2014 and into 2015. With OPEC expected to announce production cuts for 2015 if demand and prices remain depressed, the price of Brent and WTI can potentially rebound to US$110/bbl and US$105/bbl respectively over the next few months in our view.

Wheat ETPs record 18th consecutive week of inflows as price falls to 4-year low. The USDA recently announced that they expect production to climb to a record of 720mn metric tons in 2014. However, investors have slowly been building positions in wheat, on expectations optimistic forecasts will not be met. With wheat priced for perfect growing conditions, any small setback in weather in major producing countries or an escalation in trade restrictions could drive a price rally. Meanwhile, ETFS Sugar (SUGA) recorded US$2.2mn of inflows last week, as the price dropped to a 5-year low on expectations production will outpace demand this year.

Key events to watch this week. A relatively light week in terms of economic releases. Markit manufacturing PMIs for China, the US, and the Eurozone will likely be the focus as investors assess the pace of the global recovery after a few disappointing releases. Investors will also be watching for any possible new easing initiatives from China’s economy and policy officials.

Video Presentation

Simona Gambarini, 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.

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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.

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ETF inflows put a break on gold price decline

ETF inflows put a break on gold price decline

ETF inflows put a break on gold price decline. Energy: Brent would appear to have stabilised at $105 a barrel, and is embarking upon a moderate recovering. The same is true of WTI, which has risen to $98.5 a barrel this morning. When compared with last week’s major losses, though, today’s upturn is modest. For some days, the market focused entirely on ample physical supplies, but they now seem to be paying more attention to the supply-side risks again. The situation in Iraq remains unclear. It is alleged that Kurdish fighters, supported by the Iraqi airforce, have retaken some areas held by the Sunni extremists Islamic State. At the weekend, this faction captured two smaller oilfield and the biggest Iraqi dam. In the light of this news, it is hardly surprising that oil exports from northern Iraq are still at a halt. According to the Iraqi oil ministry, exports from the south of the country amounted to 2.44 million barrels a day in July, slightly more than in June. However, according to shipment details, oil exports still amounted to an average of 2.52 million barrels a day up to 23 July, which points to a sharp dip in the final week of the month. In mid-July, Iraq was still assuming that exports were reaching 2.6 million barrels a day. Libya’s oil output currently amounts to 450,000 barrels a day, compared with 500,000 barrels a day a week ago. With hostilities there continuing, Libyan oil supplies can be expected to shrink even further, even though the oilfields are safe according to the state oil company NOC.

Precious metals: Gold is still trading below the $1,300 mark, apparently supported latterly by ETF inflows: In July, the ETFs tracked by Bloomberg on a monthly basis recorded a net inflow again for the first time since March. The 15.7 tons registered constituted the largest monthly quantity since November 2012, but one swallow doesn’t make a summer. Over the year so far on balance, there has still been an outflow of some 30 tons of gold from ETFs. In view of the headwinds presented by additional demand components, the ETF inflows will probably merely have slowed down the price decline in recent weeks. While the present negative factors remain – a strong US dollar, weak physical demand in Asia, and weak coin sales in the west – we do not envisage any serious price gains. In addition to modest coin sales in the US, Australian coin sales too, for example, dipped sharply month on month in July to 25,100 ounces.

Demand from the automobile industry for platinum and palladium remains robust. There were 16.4 million vehicle sales in the US in July, measured on a seasonally adjusted annual basis. While this was down slightly on June, when the highest figure for almost eight years was recorded, it was nevertheless up 4.5% on a year ago.

CHART OF THE DAY: Diverging development of corn prices in the US and China

Base metals: Indonesia’s trade deficit rose again in June to some $305 million, owing mainly to a drop in commodity exports. The first-half deficit amounted to $1.15 billion on account of the country’s new mineral resources policy introduced in mid-January. This is no doubt one reason for the government’s announcement yesterday that the export tax on ore concentrates would be cut to 0-7.5%. The original tax was on a progressive scale starting at 20%, but the reduced rate applies to mining companies who have made a commitment to build smelting plants in Indonesia, and is linked to construction progress. According to a government authority, the mineral ore export ban and the export tax together have resulted in at least 50 projects for the construction of smelters in Indonesia being launched, with a total value of over $31 billion. They are to be realized in the coming years. Consequently, we could soon see more supply from Indonesia on the global market again, with the situation on the nickel, bauxite and copper markets easing. Copper producer Freeport-McMoRan, which reached an agreement with the Indonesian government just over a week ago, will according to its own information be exporting copper concentrates again as of tomorrow. Since the rise in nickel prices this year in particular was due to the Indonesian export ban, we see scope for correction here in the event of higher exports.

Agriculturals: While corn is trading at a four-year low in Chicago, prices in China are soaring. Corn has risen 10% so far this year on the Dalian spot market to hit a new high. On the futures market, contracts maturing in September are trading at a multi-year high. Some of the country’s major cultivation areas, amounting to 4 million hectares, are suffering a drought. This brings a threat of a lower yield, especially in the central Chinese provinces Henan, Shaanxi and Hubei.

However, forecasts are still predicting a record corn harvest in China. The USDA, for example, raised its forecast in July by 2 million tons to 222 million, which it expects to match consumption. The International Grains Council has not amended its estimate of 220 million tons. Chinese official forecasts too give a figure of 223 million tons, as higher output is expected in the northwest of the country. Even in the event of a lower crop, therefore, China would probably only have to import a little more corn, especially since it has been building up inventories on a generous scale in recent years, and is highly restrictive with imports of genetically modified varieties. While imports have been high by past standards in recent years, in absolute terms they have been low at a maximum 5.2 million tons in 2011/12, as the country is still adhering to a policy of being as self-sufficient as possible. The USDA envisages imports of 3 million tons in 2014/15.