Inflows into gold ETPS bounced back, as bargain hunters appeared to chase lower prices……
Caught in the cross hairs of trade wars, industrial metal basket ETPs extend outflows for the 2nd week in a row
Long Yen short Euro ETPs received the highest inflows in 6 weeks, as EU leaders reached an agreement on immigration
Inflows into Gold ETPs worth US$73.3mn bounced back reversing the prior 2 weeks of outflows as bargain hunters appeared to chase lower prices. Gold prices ended the second quarter at US$1252.60 per troy ounce, its lowest level in nearly 6 months. Despite the ongoing geopolitical tensions, trade wars and the correction in global stock markets, gold historically known for its safe haven status, has failed to benefit from the risk-off environment. This makes logical sense as gold has always been associated with being a long-term form of insurance as opposed to a knee-jerk safe haven against short term market volatility. A persistent and long term correction in the equity markets is likely to lend buoyancy to gold prices. So far in 2018 the strong US dollar, against the backdrop of the rising rate environment in the US, has underpinned most of the weakness of gold prices owing to their counter cyclical relationship. Sentiment towards gold remains very weak, however last week’s inflows suggest investors are positioned for a turnaround in gold prices.
Outflows from crude oil ETPs rose to US$21mn extending the trend of outflows for the 2nd consecutive week as profit takers appeared to be lured by higher oil prices. Oil prices rose sharply last week as a result of further supply outages, falling US stockpiles and reports that the Trump administration was aiming to shut down all Iranian crude exports by November 4. Record high crude oil processing coupled with a marked rise in US crude oil exports were the key reasons for the unexpected sharp fall in US crude oil stocks by 9.9 million barrels last week as reported by the US Department of Energy (DOE). The price differential between Brent and WTI narrowed further from $10 to $5 per barrel owing to current outage of an oil production facility in Canada’s Alberta oil province. The facility has a production capacity of nearly 350,000 barrels per day ad is likely to remain out of operation until the end of July resulting in less crude oil from Canada reaching the US. As the narrowing of the price differential between Brent and WTI, reduces the attractiveness of US exports, we expect US crude oil stocks to remain elevated in the coming months.
Industrial metal basket ETPs faced redemptions worth US$38.9mn for the second week in a row as ongoing trade tensions weakens sentiment. Industrial metal prices continued to meander amidst the ongoing trade wars. The Trump administration announced it would be pushing forward with its plans to restrict Chinese investment in the US but it would restrain from implementing its harshest measures. Meanwhile outflows from copper ETPs worth US$31.8mn continued for the 3rd week in row, rising to their highest level in 39 weeks.
Long Yen short Euro pair received the highest inflows worth US$9.1mn in 6 weeks, after the European Union leaders reached an agreement on migration at the EU summit. Bargain hunters appeared to drive inflows into long Yen short Euro linked ETPs as the Yen declined 0.94% versus the Euro last week subsequent to the news that the European Council (EUCO) reached the all-important EU immigration agreement.
Outflows from US Dollar ETPs worth US$15.9mn rose to their highest level in 20 weeks.