Etikett: safe haven

Gold’s safe haven status reignited as uncertainty looms

ETF Securities Gold's safe haven status reignited as uncertainty loomsGold’s safe haven status reignited as uncertainty looms

Gold’s safe haven status reignited as uncertainty looms – Weekly Flows Analysis

Highlights

•  Gold back in favour as investors seek protection against uncertainties ahead
•  Mixed Q2 earnings data helped buoy sentiment, driving inflows into US small cap equity ETPs
•  Investors continued to trim short GBP exposure and long USD positions

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Last week the European Central Bank (ECB) meeting took centre stage following a similar policy response post Brexit to the Bank of England. President Draghi decided to leave interest rates unchanged and lacked clarity on the likelihood of further easing. While he warned of non-performing loans (NPLs) posing a threat to the recovery of European banks, he downplayed the risks of Brexit. UK PMI data last Friday declined below 50, reinstating economic fears as it marks the fastest economic contraction since 2009.

Gold back in favour as uncertainty looms. Over the past week, gold prices shed 1.1%, as a stronger US dollar and increasing risk appetite among investors have helped US stocks reach record highs. In addition, the improving outlook of the US economy has raised the probability of a Fed rate hike in September to 24%. Higher rates tend to weigh on gold prices as it struggles to compete with yield-bearing assets. However, the increasing geopolitical risks such as the recent failed coup attempt in Turkey and terrorist activity in Nice, strengthens the investment case for gold. Last week inflows into gold ETPs surged to US$123mn reversing the prior’s week’s trend, as investors bought on dips to hedge against uncertainties ahead. At the same time, silver ETPs saw outflows of US$10.4mn owing to the 2.2% price decline last week. Net speculative positioning in silver hit a fresh record high last week and the gold silver ratio has narrowed significantly suggesting a price correction is imminent.

Inflows into crude oil ETPs rise for the 3rd consecutive week. WTI and Brent crude oil prices came under significant pressure as the oversupply of oil products casts doubts on the future demand for crude. WTI and Brent fell by 3.8% and 4% last week respectively and bargain hunting drove US$6.1mn of inflows into oil ETPs.

In currencies, investors continued to trim short GBP exposure and long USD exposure worth US$9mn and US$7.8mn respectively.

US small cap equity ETPs increase for the first time in 6 weeks by US$5.7mn. A raft of overall positive Q2 corporate earnings data in the US helped buoy sentiment, helping US stocks attain record highs.

Inflows into wheat ETPs rise for the 6th consecutive week. Bargain hunters continue to drive inflows into wheat ETPs as prices trade close to 10-year lows. Inventory estimates have swelled 6% over the past three months to an all-time high signalling further potential downside for wheat prices.

Key events to watch this week. Focus now shifts to the Federal Reserve meeting that starts on Tuesday as investors scan for clues on the likely rate path. Friday sees the release of the US Q2 GDP growth data. After Bank of Japan (BOJ) governor Kuroda ruled out the prospect of “helicopter money” last week, investors await the BOJ meeting on Friday for further details on the stimulus package.

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.

Uncommon truths from Source

Uncommon truths

Oh David, what have you done?

Uncommon truths. ”The UK votes to exit the EU. Cameron resigns” was among our list of 10 ”improbable but possible” events for 2016. Though we had neutralised our UK exposures ahead of the vote, we never really expected it to happen. Nor did the markets judging by Friday’s reaction.

Sterling took it on the chin and UK 10 yr yields fell by nearly 30bps, more than other ”quality” sovereign yields. However, when it came to equity markets, that of the UK was protected by the decline in sterling and the biggest pain was reserved for Japan and the Eurozone.  The former suffered due to the ”safe-haven” status of its currency while the latter was hit by fears of contagion, both economic and political.

How we react now depends upon whether we think the markets got it right on Friday or whether there was an over or an under-reaction. In our opinion the direct economic consequences of Brexit will be felt most acutely in the UK, with a smaller negative effect in the rest of the EU and little or no effect in the rest of the world (what the UK loses in export and FDI share will likely go elsewhere, probably within Europe). A dramatic future economic scenario outside the UK relies on political contagion to the rest of the EU bringing an end to the Eurozone and the EU itself.

There are many uncertainties but what we do know can be summarised as: the UK is likely to leave the EU and Scotland appears set to seek independence from the UK; UK politics are in a mess, with a new PM unlikely to be appointed until October, the Labour party tearing itself to shreds, the leaders of the Brexit campaign unprepared for victory and discontent among those who wanted to stay in the EU; there are calls from within a range of other EU countries to hold similar referendums and a number of countries have potential ”trigger” events (today’s election in Spain, Italy’s October constitutional referendum, for example); central banks are now likely to be more accommodative, including the Fed.

The above is a mixed bag but would leave most investors on the cautious side. However, there are some more positive possibilities, which basically consist of the UK and other EU governments making good decisions (including Eurozone fiscal union and a break with austerity). Realistically, central bankers are likely to continue being first line of defence for some time.

Friday provided a good template for what the markets could do under a negative scenario: gold, sovereign debt and defensive equities would outperform.

A more constructive scenario would see the reverse, with ”riskier” bond categories (EM and HY) outperforming along with equity-like assets (especially Japanese and Eurozone equities, along with banks).

Though volatility may remain elevated in the short term, we suspect the markets got it just about right on Friday and do not wish to change our stance at this stage. The world now feels like a riskier place but that has been reflected in prices and volatility indices (the VSTOXX index peaked at 42 on Friday, a level usually seen when a buying opportunity presents itself). We maintain our maximum exposure to cash (it is there for if the markets sink further) and are slightly overweight in equity-like assets. The obvious candidates for purchase at the moment would be Eurozone and Japanese equities but we already have as much of those as we allow ourselves to hold.

Apologies for the late arrival of this and the length of the document. It is a one-off event, we hope!

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Inside this week

Figure 1: UK equities outperform when STG falls
Figure 2: UK savings and bond yields
Figure 3: Asset class returns — A week that finished well for JPY, gold and sovereigns
Figure 4: Equity sector returns — Bad week for banks; good for healthcare and staples
Figure 5: The week ahead — Spanish election results, US ISM, China PMI

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Limit to Yen rally after BOJ disappoints

Limit to Yen rally after BOJ disappoints

Limit to Yen rally after BOJ disappoints. The Japanese Yen rallied over 3% against the US Dollar after the Bank of Japan’s (BOJ) latest policy decision to ‘stay the course’ with its current stimulus stance and nearly 10% ytd. Such a policy decision is refreshing.

It seems that foreign Japanese investors’ and firms are losing faith with the economic management of the country and reacting by hedging foreign exposures against adverse Yen movements With ongoing concerns over inflation and with the Fed beginning  its tightening cycle.

Decades of low inflation and weak growth have rendered policymakers ineffective in the eyes of investors and burgeoning local savings have moved offshore in search of better returns. Offshore markets provided returns but the Yen’s safe haven characteristic, a stronger local currency can offset better offshore returns. IMF research asserts that the stronger Yen is likely due to a ‘portfolio rebalancing through derivative positions’, which is to say domestic foreign positions being hedged against adverse Yen movements. Limit to Yen rally after BOJ disappoints

Unconventional policy

Unconventional policy does need to be deployed in Japan and perhaps the key reason is hidden in its December monetary policy statement. The BOJ speaks of the ‘conversion of firms’ and households’ deflationary mindset has been progressing’, which is key to raising inflationary expectations and in turn achieving the inflation target. So the BOJ feels its policy is working and that its move to negative interest rates can assist the ‘progress’.

While the market appears to be losing faith in the BOJ, the central bank appears to be committed to its unconventional policy and wants to see it work its way through the economy given time. Indeed, it was only in January that negative rates were implemented and monetary policy has a lagged impact. Japanese companies clearly hedge their foreign operations, whether that be trade or investment related. It is for this reason that central bank policy needs to be independent of market expectations and shouldn’t be concerned about the day-to-day gyrations of the local currency. The BOJ was right to ignore the market’s expectations for policy. Such a policy decision is refreshing in the light of the US Fed being swayed by market angst and potentially trapping itself in a dangerous policy spiral , which is based on the markets’ view and not fundamentals.

Nonetheless, we expect more stimulus in 2016 to come from the BOJ, and with the Fed tightening, we feel this knee-jerk rally to the latest policy move is limited.

Click to enlarge

Martin Arnold, Global FX & Commodity Strategist at ETF Securities

Martin Arnold joined ETF Securities as a research analyst in 2009 and was promoted to Global FX & Commodity Strategist in 2014. Martin has a wealth of experience in strategy and economics with his most recent role formulating an FX strategy at an independent research consultancy. Martin has a strong background in macroeconomics and financial analysis – gained both at the Reserve Bank of Australia and in the private commercial banking sector – and experience covering a range of asset classes including equities and bonds. Martin holds a Bachelor of Economics from the University of New South Wales (Australia), a Master of Commerce from the University of Wollongong (Australia) and attained a Graduate Diploma of Applied Finance and Investment from the Securities Institute of Australia.

Är det köpläge i denna guldproducent?

Är det köpläge i denna guldproducent?

Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ), en börshandlad fond som spårar aktiekurserna för en rad mindre företag som arbetar med utvinning och prospektering av guld, har stigit med cirka 18 procent de senaste veckorna. En av orsakerna till denna uppgång är att många investerare vill ha säkrare tillgångar när börsen är orolig, vilket har stärkt guldpriset. Är det köpläge i denna guldproducent?

Efter att ha rasat sedan den så kallade finanskrisen och och lidit hårt när den kinesiska efterfrågan på guld avtog samtidigt som aktiemarknaden började oroa sig för miljöeffekterna av guldutvinningen har nu gruvföretagen sett sitt största rally sedan 2008.

Ett annat stöd för denna nedtryckta sektor har varit en allt svagare dollar. Dollarn tyngs på spekulationer om att en fortsatt osäkerhet kommer att tvinga FED att avstå från att höja räntan inom en snar framtid. En direkt effekt av en svagare dollar är att alternativa tillgångar som till exempel ädelmetaller attraktivare.

Ökat intresse för guld

På senare tid har vi sett en ökad efterfrågan på guld då denna ädelmetall fungerar som en säker tillflyktsort, en så kallad safe haven, efter devalveringar i Asien som skall läggas till en ökad efterfrågan efter tillgångar som är säkrare än pappersvalutir eller aktier och obligationer.

Guldtillgångar ser mer attraktiva i en lågräntemiljö då ädelmetall är mer konkurrenskraftigt mot tillgångar som betalar låg avkastning, som till exempel obligationer. Dessutom, om FED avstår ytterligare räntehöjningar skulle detta kunna indikera att ekonomin inte är lika stark som marknaden ansett, vilket också skulle bidra till guld lockar fler investerare eftersom det fungerar som en säker tillflyktsort.

Samtidigt har analytikerna på UBS hävdat att under 2016 kommer en vändning för både guld och de företag som utvinner och prospekterar denna ädelmetall. Stora volymer och ett pris som rör sig i sidled indikerar att de aggressiva säljarna fått sällskap av lika aggressiva köpare. För den som tycker om teknisk analys noterar vi att Moving Average Convergence Divergence oscillator kan komma att ge ifrån sig en köpsignal om den fortsätter sin väg ovanför nolllinjen. Är det köpläge i denna guldproducent?

Sliding Oil Prices Attract Bargain Hunters

Sliding Oil Prices Attract Bargain Hunters

ETF Securities Commodity ETP Weekly – Sliding Oil Prices Attract Bargain Hunters

Highlights

•  Long WTI and Brent crude oil ETPs received US$ 48.2mn and US$12.0mn respectively marking the seventh consecutive week of inflows into oil ETPs.

•  Outflows of US$106.2mn from gold ETPs marked the 13th consecutive week of redemptions.

•  Agricultural ETPs continue to see strong inflows.

•  Outflows from ETFS leveraged Coffee (LCFE) rose to the highest level in 10 weeks.

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The depreciation of the Yuan against the US dollar by 3.4 percent last week caused by reform to the fixing method sent reverberations across commodity markets, revitalizing gold’s safe haven status. In addition the sluggish European GDP data sparked concerns on the strength of the European economic recovery. The PMI data in Europe and Industrial production figures will remain in focus this week.

Long WTI and Brent crude oil ETPs received US$ 48.2mn and US$12.0mn respectively marking the seventh consecutive week of inflows into oil ETPs. The monthly report by Organization of Petroleum Exporting Countries (OPEC) confirmed that OPEC continues to keep the world oversupplied as their collective output surpassed 31.5 million barrels per day (mb/d) compared to their target of 30 mb/d. Bargain hunters took support from the monthly International Energy Agency (IEA) report that revised the 2015 global growth outlook upwards, raising demand expectations by 1.6mb/d in 2015, by the fastest pace in five years. The weekly US Energy Information Agency (EIA) report showed US crude oil supplies fell by 1.7m barrels, just shy of expectations. However EIA crude stocks are 86.5mn barrels above year ago levels and 93.2mn barrels above the five year average. The WTI crude oil price fell to a 6½ year low of US$41.3 per barrel considerably lower than its global counterpart Brent oil that hovered below US$50 per barrel leading to a widening price gap US$7 per barrel, last seen in May 2015. This has been blamed on rising storage levels at Cushing. Crude oil imports for the week stood at 7.5mb/d compared to 7.18mb/d the previous week. Evidently China took advantage of lower oil prices by importing a record volume of 30.71mn tons of crude oil in the first 7 months of the year up 10% since a year ago.

Outflows of US$106.2mn from gold ETPs marked the 13th consecutive week of redemptions. China’s change in currency policy lent support to gold, which rose to a three-week high of $1120/oz. ETP investors took profit, reaccelerating redemptions, which seemed to have slowed the week prior. The World Gold council (WGC) highlighted just how weak demand for the yellow metal was in Q2, with consumer demand in India and China falling 25% and 3% respectively. The industry body however expects current low prices to ignite consumer demand in these countries in a similar way to 2013.

Agricultural ETPs continue to see strong inflows. ETFS Agriculture (AIGA), ETFS Wheat (WEAT) and ETFS Corn (CORN) each saw their third consecutive week of inflows, of US$6.6mn, US$2.3mn and US$2.6mn respectively. In its latest monthly report, the USDA raised its US corn production forecasts by 1.2% driving its price down 1.6% over the week. However, with an intensifying El Nino likely to disrupt production later this year, ETP investors accumulated positions in corn in anticipation of a price rebound.

Outflows from ETFS leveraged Coffee (LCFE) rose to the highest level in 10 weeks. Arabica coffee prices rose 10.3% last week, driving profit-taking. Prices rose despite IBGE, the Brazilian government’s official statistics institute raising its forecast by 800k bags for the Brazilian coffee crop to 44.2m bags.

Key events to watch this week Investors will continue to remain focused on PMI data in Europe and industrial production in the US.

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.