Assets in commodity ETPs rose to an all-time high of $207 billion in the third quarter (Q3) of 2012, a rise of $31 billion, according to data from ETF Securities.
Gold ETP assets rose to a new record of $151 billion.
Assets surged on the back of strengthening demand for gold ETPs, as aggressive moves by the US Federal Reserve (Fed) and the European Central Bank (ECB) to ease monetary policy increased investor demand for hedges against further currency debasement.
Gold ETPs enjoyed the largest inflows and increase in assets of any commodity. The precious metal saw net new inflows of $7.7 billion, which helped to lift assets to a new record of $151 billion, an increase of $23 billion during the quarter. This was the best quarterly rise for gold ETPs since Q2 2010.
Silver ETPs saw the next largest increase in assets, with assets rising to $20.0 billion, up $5.1 billion in Q3. Net inflows increased $477 million over the period.
Diversified broad commodity ETP assets rose to $17.0 billion, up $2.7 billion on the quarter, as investors started to feel more comfortable with the macro outlook following the ECB’s announced policy support for Spain. This category saw the second largest net new inflows after gold, with $1.1 billion of new purchases.
Platinum ETPs also saw strong demand, with new inflows of $229 million over the quarter, bringing total platinum ETP holdings to $2.9 billion. Labour strikes in South Africa, which produces 80% of the world’s platinum supply, reduced platinum supply causing a surge in the platinum price and investor demand during the quarter.
Industrial metal ETPs benefited from improved investor sentiment, with net new inflows of $81 million. Broad diversified industrial metals ETPs saw the largest inflows, with inflows of $116 million. Total assets in industrial ETPs stood at $1.9 billion at the end of the quarter.
Agriculture ETPs, on the other hand, continued to see outflows, with net sales of $77 million. This is the fifth consecutive quarter of agriculture ETP selling, likely reflecting investors taking profits on the large price increases this year. Total assets in agriculture ETPs now stand at $4.0 billion
Energy ETPs saw $627 million of outflows in Q3, primarily due to net selling of oil ETPs as prices rose and investors took profits. Natural gas ETPs saw modest net inflows as investors anticipated price gains on increased demand due to hotter-than-usual weather across the US this summer. Total assets in energy ETPs now stand at $7.6 billion.
Nicholas Brooks, head of research and investment strategy at ETF Securities, said: “The rise in commodity ETP assets to a new record in Q3 2012 was primarily driven by strong investor demand for gold and silver ETPs to hedge against currency debasement as the world’s major central banks made clear their intention to extend current asset-purchase programmes.
“Broad commodity and industrial metal ETPs also saw a pick-up in demand as central bank policies and improved US data helped boost interest in more cyclical assets. Agriculture and oil ETPs saw outflows as investors sold following strong price increases.
“As we move into the fourth quarter demand for gold ETPs has continued unabated as investors anticipate further central bank easing through the rest of the year and into 2013. The demand for broad commodity and industrial metal ETPs will depend very much on whether the recent improvement in sentiment towards Europe and US macro data proves to be sustainable or not.”