While investors pared back their defensive positions in gold and precious metal baskets, they built positions in technology equities, industrial metals and commodity FX baskets. x Inflows into robotic themed ETFs (US$7.2mn) and cyber security themed ETFs (US$6.4mn)….
were the highest in five and three weeks, respectively. x Industrial metals receive inflows for the fourth consecutive week.
Technology-themed ETFs see multi-week high inflows. Both robotic and cybersecurity ETPs have seen stellar inflows since their inception. Last week’s inflows of US$7.2mn and US$6.4mn respectively into robotic and cybersecurity ETPs marked the highest in five and three weeks. In the past year, robotic themed equities have returned close to 39%, while cybersecurity themed equities have returned close to 21%.
Industrial metal basket ETPs receive inflows for the fourth consecutive week. There were US$13.2mn of inflows into industrial metal baskets last week. A raft of upside surprises in Chinese data releases last week continued the positive momentum for industrial metals prices. Chinese industrial production, retail sales and GDP all beat expectations. China is the largest consumer of industrial metals and continued growth in its economy indicates that its demand for these commodities is unlikely to abate. We remain positive on Chinese economic growth at least until the end of this year as the country aims to maintain an even keel in the run-up to the 19th National Congress of the Communist Party of China.
Investors favour silver over gold. Last week’s inflows of US$17mn marked the third consecutive week of inflows into long silver ETPs. Meanwhile long gold ETPs saw outflows of US$28.5mn and long precious metal baskets saw outflows of US$5.6mn. With continued signs of economic strength, investors have sided with silver as it has higher upside potential in periods of cyclical growth. While we believe that gold will end Q2 2018 roughly flat at today’s levels, silver could rise more than 10% and bring the elevated gold to silver ratio back down closer to historical average levels. We believe that upside inflation surprises will benefit both metals, but with greater industrial usage and continued mine supply deficit, silver is better positioned in this point of the economic cycle.
Commodity FX baskets see highest inflows since April. In a further sign that investors are getting more optimistic about cyclical assets – in particular those that are exposed to commodities – investors bought US$7.7mn of commodity FX baskets. Following an increase in policy rates by the Bank of Canada, the Canadian Dollar jumped to the highest level in 13 months, which could signal that demand for underlying oil demand is recovering. The Norwegian Krone has also appreciated to a nine-month high as the recent rally in oil prices has lifted the currency.