ETF Securities’ Gold ETPs recorded their second-highest inflows of the year during the week beginning 20 March, adding $167 million, according to the firm’s latest ETF weekly flows analysis. The London-based commodity ETF specialist has attributed the surge in demand to expectations of Fed dovishness supporting gold prices further.
Gold ETPs have seen $544m inflows YTD as the gold price has risen 7% over the same period.
Edith Southammakosane, Director, Multi-Asset Strategist at ETF Securities, said: “We believe a dovish Fed will lead to further decline in real interest rates as inflation continues to rise, potentially sending the gold price higher to $1,300/oz by mid-year.”
Gold prices rose 1.5% during the week and are up 4% since the Fed rate hike on 15 March, trading around $1,250 as of 27 March 2017.
Gold’s success, both in terms of positive net inflows and price appreciation, was achieved despite evidence that investor fears regarding political uncertainty in Europe may be declining. Optimism for the euro in particular appeared to grow, indicated by inflows of $9m to short USD long EUR ETPs during the week.
Southmammakosane commented: “While Theresa May will trigger Article 50 this week, starting the two-year negotiation period to leave the EU, the victory of the conservative party in the Netherlands and French candidate Macron taking the lead in the polls have led to fading fears of a rise in populism in Europe that have supported the euro.”
In the energy space, the flows analysis revealed oil ETPs recorded net inflows for the fourth consecutive week, even as oil prices continued to slide. Oil ETPs added a collective $22m while Brent and WTI fell by 1.8% on average during the week, finishing close to $50/bbl for Brent while WTI was trading at a $2.8/bbl discount.
Southammakosane said: “We believe oil prices will continue to fall as Saudi Arabia’s domestic demand is likely to rise, reducing the probability of more output cuts in the coming months. Meanwhile in the US, rig counts, oil production and inventories all continue to increase, exacerbating the oversupply trend and weighing on the price of WTI.” Net speculative positions on both futures contracts declined by another 13% on average during the week beginning 13 March suggesting more downside pressure in the near term.
The report also showed that investor interest in thematic ETPs continued to grow. Cybersecurity and robotics ETPs recorded inflows of $5m and $16m during the week, alongside a price rise of 1.4% for cybersecurity, but a decline of 1.1% for robotics. Southammakosane stated: “With the exception of one week, these ETPs have continuously recorded inflows since their launch, totally $142m and $401m of assets for cyber security and robotics respectively. Prices have risen by 13% for cyber security and 12% for robotics in the year to 27 March.”
In percentage terms, the top five inflows were seen in cocoa, natural gas, palladium live cattle and lead, while the bottom five performers were carbon, nickel, coffee, corn, and wheat. Bonds had a relatively quiet week, the largest move being the $10m inflows seen to emerging markets sovereign debt.