ETF Securities Weekly Flows Analysis – Bargain hunters look for laggard platinum to play catch-up
Highlights
- Platinum ETPs receive largest weekly inflows in 18 months, totalling US$43.2mn.
- Gold ETP inflows resume, totalling US$42.8mn, as investors remain defensive.
- Oil ETPs have experienced outflows in 14 of the past 15 weeks, totalling US$459mn over the period.
- Highest inflows for copper ETPs in eight weeks, totalling US$6.1mn.
Platinum ETPs receive largest weekly inflows in 18 months, totalling US$43.2mn. Platinum has been by far the laggard of the precious metals sector with just 0.7% gains, compared to the stellar performance of palladium with 43.2% in 2017. Bargain hunters are expecting this underperformance to turn around, driving inflows in three out of the past four weeks. Meanwhile, palladium ETPs have seen investors booking profits, with three consecutive weeks of outflows, totalling US$9.6mn over that period. Indeed, palladium ETPs are the only ones in the precious metals sector to record year-to-date outflows.
Gold ETP inflows resume, totalling US$42.8mn last week, as investors remain defensive. With global equity valuations remaining high and the bond market balloon fully stretched, investors remain prudent and looking to gold for some portfolio diversification. The threat of a December interest rate hike in the US and possible tighter monetary policy from UK is also likely to keep pressure on gold prices in the coming months. Looking ahead, although US Federal Reserve (Fed) Chair Yellen is out of the race – the battle for the new Fed Chair position is reportedly down to two: Jerome Powell and John Taylor – we expect that the trajectory of the Fed’s policy rate path will remain unchanged in 2018. The market still underestimates the Fed and is pricing in less than one rate hike in 2018, compared to the central bank’s ‘dot plot’, which indicates that there will be three rate rises next year. As a result, rising rates and a stronger US Dollar will likely put some modest downside pressure on the gold price.
Oil ETPs have experienced outflows in 14 of the past 15 weeks, totalling US$459mn over the period. With oil prices trading at the upside of our expected US$45-60/bbl range as comments from Saudi officials suggest further OPEC cuts in the pipeline, the outflows from crude ETPs indicate investors do not feel that the recent rise in oil prices is sustainable. Brent reached the highest level since July 2015 last week, despite reports of expanding US production and inventory levels that remain well above longer-term average levels. With the differential between Brent and WTI at the second widest level (the spread was wider in late September 2017) in over two years, rising US production is likely to keep exports elevated and keep the global market well supplied in the near-term.
Highest inflows for copper ETPs in eight weeks, totalling US$6.1mn. Copper has been the best performer in the industrial metals sector over the past year, and investors believe this is likely to continue. We expect continued improving fundamentals as supply-side destruction, a multi-year supply deficits and increasing Chinese demand support prices in the industrial metals sector.
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