ETF Securities has announced its range of precious metals ETFs saw starkly differing levels of investor demand during the week beginning 4 December, according to weekly flows analysis from the firm. Gold ETFs saw the largest outflows of any segment covered by the firm’s products, losing $50.8 million during the week, marking the third consecutive week of outflows for such ETFs. Silver ETFs meanwhile, saw the largest inflows of any segment, adding $41.7m in net new assets.
Silver ETFs were in high demand last week, adding $41.7m of net new assets.
The week saw gold’s largest weekly price drop since May this year, as a strong jobs report released on Friday all but confirmed a rate hike by the Federal Reserve this month, therefore dampening demand for the non-interest-bearing metal.
Aneeka Gupta, associate director, equities and commodities at ETF Securities, commented: “The anticipation of higher US interest rates coupled with progress on tax reform has helped lift the US dollar higher adding further pressure on gold prices. Furthermore, the improvement in risk appetite considering the postponement of the US partial government shutdown and ongoing progress in the Brexit negotiations have diminished gold’s role as a safe haven asset.”
Gupta also noted the potentially gold-price-negative effect of the cryptocurrency Bitcoin, which has been making headlines recently as it continues to appreciate in price. “Bitcoin’s explosive appreciation has also taken some of the shine off gold. We expect gold to remain flat over the coming year discounting the likelihood of any geopolitical flare up.”
In stark contrast, investors rushed to invest in ETF Securities’ silver products such as the ETFS Physical Silver (PHAG LN). The record low price of silver, driven by negative sentiment, has attracted bargain hunters according to Gupta. “Known to derive the majority of its use in the industrial applications sector, silver looks under-priced when compared to the rally staged by the industrial metals sector,” she said. “As the narrative for improving global economic conditions remains intact, we expect silver to rebound from current levels buoyed by positive investor sentiment and rising industrial demand.”
Elsewhere in commodities, the firm’s industrial metals ETFs reversed a two-week streak of net inflows to record significant outflows of $130m on the back of profit taking by investors after strong price gains seen in the segment. The outflows were dominated by broad basket exposure ETFs, which lost $118m during the week. “We expect the supply deficit to extend into 2018 owing to the lack of investment in mining infrastructure,” said Gupta. “In addition, strong growth from emerging markets (accounting for 70% of demand) should support demand for industrial metals going forward.”
Other notable commodity flows during the week included the $20m lost by oil ETFs, the twelfth consecutive week of outflows from the segment. Flows were largely driven by the $19m outflows seen by the firm’s WTI crude ETFs, such as the ETFS WTI Crude Oil (CRUD LN).
Gupta commented: “We continue to believe that the OPEC-led rally is likely to be short lived and the current high compliance levels are at risk of slipping as the option for a premature exit from the production cuts has been inserted. Given the current pace of oil production expansion in the US, the global supply deficit will be short lived and this is likely to weigh on prices going forward.”