ETFS – Gold ETP Inflows Surge by Most in 11 Months as Gold Price Reaches New All-Time High

Gold ETPs saw the largest inflows  since August 2010 as  further sovereign  downgrades were announced and Federal Reserve Chairman Bernanke indicated the possibility of QE3.  With inflationary pressure continuing to rise, real interest rates are low or negative in many major economies, making precious metals a more attractive investment. Financial markets remain turbulent and in the current uncertain environment, investors will be paying close attention to underlying economic activity indicators. While the Eurozone PMI’s and retail activity in the UK will be scrutinised by investors this week, the fallout from last week’s bank stress tests are likely to drive near-term sentiment…. 

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            Physically-backed gold ETC inflows surge over $220mn.

            The gold price rose to record level of $1,589/oz last week (and continues to rise today), as ratings agencies S&P and Moody’s Investor Services indicated the potential for a US credit downgrade should the nation not be able to resolve its debt ceiling standoff. Moody’s also downgraded Ireland’s debt to junk status.  ETF Securities physically-backed gold ETCs experienced the largest inflows  in nearly a year  last week,  as  investors responded to the  worsening sovereign outlook. The comments by  US  Federal Reserve Chairman Bernanke about the potential for another round  of quantitative easing, QE3,  if the economic outlook deteriorated, also provided good support for bullion prices.

            Agriculture ETPs see first outflows in six weeks, as investors cut short soybean positions, take profits.

            The $45mn outflows from agriculture are the largest in nine weeks, but are confined to three commodities.  ETFS Short Soybean Oil (SSYO) experienced outflows of $15.9mn on the back of a  bullish  jump in US exports. Strong price gains for wheat tempted investors to take profits, with ETFS  Leveraged Wheat (LWEA) seeing $8.6mn outflows after a 23% price surge last week. Meanwhile, a 15% gain over the past month for sugar has prompted investors to reduce positions in ETFS Sugar (SUGA), totalling $13mn last week. Agricultural markets  are expected to remain an investor focus, with hotterthan-expected weather conditions driving prices higher recently.

            Largest outflows from energy ETCs in five weeks, totalling $48mn.

            Sharp price rises in natural gas on the back of hotter weather in the US prompted investors to reduce positioning, with ETFS Natural Gas (NGAS) experiencing $13.6mn of outflows. Oil ETCs also saw position reductions with  ETFS Leveraged Crude (LOIL) and ETFS Brent (OILB) seeing $17mn and $8mn in outflows, respectively. ETFS Brent 1-year (OSB1) bucked the trend,  seeing modest inflows.

            Source: ETFWorld – ETF Securities Commodity ETP Weekly


            – Valuesabove100% indicatean above average turnover compared to either the prior 30 trading days or the prior 260 trading days.

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