ETF Securities, a leading provider of commodity-based exchange-traded products, has released its latest weekly multi-asset research report highlighting trends in commodities markets. The following is a summary of the main moves over the week.
Commodities ETP round-up: investors offload gold but seek bargains in energy and copper
Investors abandoned gold ETPs to the tune of $58.6m last week but sought bargains in energy and copper ETPs.
Gold ETPs experienced major outflows to the tune of $58.6m last week. The ETFS Gold ETP ended the week down 0.8% but made significant gains during Friday trading on the back of underwhelming policy moves by the European Central Bank (ECB), a depreciating dollar, and a strong US payroll report which increased expectations for a rate hike by the Federal Reserve in December. The day’s rally highlights that further movements in the price of the yellow metal may be possible in the lead up to the Federal Open Market Committee meeting on 16 December.
Aneeka Gupta, Associate – Research Analyst at ETF Securities, commented: “Gold rose 2.6% on Friday after the US dollar depreciated by 2.4% on Thursday following the ECB’s disappointing policy moves. Most of the price moves came on Friday following a stellar jobs report from the US, which led the market to believe that a December 16th Fed hike is now a ‘done-deal’. During previous Fed rate hikes, the US dollar often sells off and gold rises (contrary to popular perception), as markets ‘buy on the rumour and sell on the fact’.
“The unexpected rise in the labour force participation and upward revisions to the last month’s stellar print in non-farm payrolls made the 2015 US rate hike a near reality. The ECB’s fresh stimulus measures unveiled on Thursday fell short of investors’ expectations causing the overcrowded short euro trade to unwind. We suspect that an overcrowded short gold trade has also fallen away, although we will have to wait for Friday’s weekly release of CFTC data for confirmation.”
In the energy markets, investors poured money into oil-based ETPs as low prices led to bargain hunting. A total of $31.6m net inflows were recorded across all oil ETPs with the majority of the inflows contributed from ETFS WTI Crude Oil ETP (+$12m) and ETFS Daily Leveraged WTI Crude Oil ETP (+7m). Natural gas ETPs also registered significant net gatherings of $5.7m over the week.
These flows may have represented active bets on the results of the OPEC meeting that took place in Vienna last week. Unfortunately for those investors, the consensus from OPEC members to maintain production levels despite the supply glut caused oil ETPs to edge lower. The ETFS Brent Crude ETP and the ETFS WTI Crude Oil ETP ended the week down 5.3% and 4.6% respectively.
Turning to precious metals and copper, the sell-off in palladium ETPs continued. Despite US vehicle sales riding at a 10-year high, investors appear to remain cautious on the metal, which is used in catalytic converters in gasoline engines. Investors have been abandoning palladium ETPs ever since it emerged that the Volkswagen scandal may be extended to include the firm’s gasoline engine models; last week saw net outflows of $5.4m from palladium ETPs.
ETFS Copper ETP received weekly net inflows of $5.1m, marking an 8-week record. Despite copper prices falling by 27.7% over the course of the year, investors appear to be expecting a rebound. Strengthening their case was the news last week that the top 10 Chinese smelters have collaborated to cut production by 350,000 tonnes, or 1.5% of global output, next year.