ETFS – Largest Silver ETP Inflows in 2 Years as Silver Price Rebounds


Silver ETPs saw the largest inflows  since July 2009 last week as a new Greek debt package soothed over near term concerns for a sovereign default in the Eurozone and sparked interest in more cyclically-oriented assets.  With COMEX speculative longs having dropped back down to end 2010 levels and the gold/silver ratio still low relative to recent history, silver has been primed for a strong rebound. This week market focus is firmly back on the other side of the Atlantic as  US  policymakers scramble to find a budget compromise to raise the debt ceiling before the August 2 deadline to avoid a debt default.  This week  also  sees  important  growth indicators  released  for both the US and UK that will help solidify investors views on the likelihood of a growth rebound later this year….. 

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            Silver investment soars at fastest rate in 2 years, with almost $70mn of inflows last week.  Platinum and palladium also saw the fastest investor inflows in the past 3-4 months last week as risk assets moved higher as concerns about the risk of a near-term  Greek government debt default  were reduced by the most recent European debt package. Data last week also showed US leading indicators rose in June, suggesting a possible rise in US growth momentum in H2 as fuel cost inflation and Japan-related supply bottlenecks ebb. Better than expected US earnings reports recently have also boosted risk appetite for more cyclically focussed commodities. 86% of the S&P 500 companies reporting earnings between July 11-21 have exceeded analyst estimates.     

            Physically-backed gold ETC investment surge  continues, with inflows up over $400mn over the past month.
            The debt agreement by  European  government  officials  last week does not appear to have been enough to slow investor demand for gold and other “hard assets”. The plan provides specific new funding for Greece and extends the usage of the existing bailout fund. However it stopped short of creating an enlarged safety net should market sentiment turn against a range of larger members. Nor did it tackle longer run issues such as enforcing  fiscal targets. Across the Atlantic, S&P reiterated its threat to downgrade  its  US sovereign debt credit rating as the Aug 2 deadline to raise the US debt ceiling looms. S&P estimates that there is a 50:50 chance that it will cut the USA AAA government debt rating within 3 months.      

            Largest  outflows from energy ETCs in 7 weeks, totalling $55mn.
            Apparent profit-taking  occurred as West Texas Intermediate spot prices moved towards $100/barrel, their highest level in over a month, following market relief at the new EU Greek debt deal and stronger US earnings and activity data. Prices were also higher on an announcement by  the International Energy Agency that it won’t extend its releases from emergency oil stockpiles. Redemption activity was spread across a variety of energy products, with  broad basket energy,  oil and natural gas ETCs seeing outflows of $22mn, $31mn and $2mn respectively.

            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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