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Gold ETPs see strong inflows as Ukraine crisis takes a turn for the worse
Gold ETPs see strong inflows as Ukraine crisis takes a turn for the worse. Gold saw strong inflows last week as the Russia-Ukraine crisis remained in focus. After some initial signs Russia might be stepping back from the brink, over the weekend pro-Russia groups pushed ahead with secessionist referendums in eastern Ukraine despite firm Ukrainian and Western government denouncements of the referendums as illegitimate and inflammatory. More volatility and safe haven buying seems likely this week. Meanwhile, investors built tactical positions in nickel as a market already being tightened by the Indonesia ore export ban may be further tightened if restrictions are put on Russian exports. Rumours that progress may be being made in South Africa strike negotiations by-passing the unions caused investors to take profit on long platinum and palladium positions.
Long gold ETPs see US$36mn of inflows as investors seek protection against a potential further deterioration of the Ukraine crisis. While Ukraine’s presidential elections on May 25th might be considered a step in the right direction, the situation in the Ukraine remains tense and a worsening of the crisis seems likely. Against the Ukrainian and Western governments wishes, Russian separatists in the Ukraine pushed ahead wtih a referendum on self-rule on Sunday, with the small groups polled voting for separation. While palladium and nickel are the metals most likely to see upside potential in case of a war between Russia and the Ukraine, gold is also likely to benefit from heightened risk as investors seek protection against a worst case scenarios.
Profit taking drives US$16mn of outflows from Platinum Group Metal (PGMs) ETPs. PGM prices rose sharply at the beginning of last week as the Ukrainian crisis remained in focus and strikes in South Africa continued through their 15th week. However, Russian President’s reassurance to have initiated the withdrawal of its troops from the border with the Ukraine prompted a correction in PGM prices towards the end of the week. Meanwhile, strikes in South Africa might be close to a resolution as producers are attempting to override the unions, addressing the striking miners directly. Lonmin, the 3rd largest platinum miner in South Africa, is preparing to restart its operations as early as May 14 after having asked workers directly whether they want to accept the latest offer and return to work.
ETFS Nickel (NICK) records the biggest inflows in a month as price reaches a two-year high. Vale, the world’s second-largest nickel producer, was ordered to suspend production at one of its plants in New Caledonia last week, prompting a strong reaction in price and US$5.6mn of inflows into NICK. Nickel is the best performing industrial metal year-to-date, up 40%, following on from Indonesia’s export ban and shrinking Chinese stockpiles. Despite the already large gains, potential deterioration of the situation in the Ukraine could lead to further price rises.
Investors seek diversified energy exposure, with ETFS Longer Dated Energy (ENEF) seeing US$6mn of inflows. At the same time, ETFS Heating Oil (HEAT) saw US$4.6mn of outflows last week. An EIA report showed that US crude oil inventories fell by1.8mn barrels last week, against expectations of a rise. Distillate fuel inventories also decreased while gasoline inventories continued to increase last week.
Key events to watch this week
Industrial production statistics for China, the US and the Eurozone will be coming out this week and will likely be closely monitored to gage the pace of the recovery in those 3 economies. Eurozone new car registrations will also be looked at and a particularly positive number could set platinum to rally. Investors will also likely monitor Eurozone Q1 GDP as this will be key for further action by the ECB next month
Important Information
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.
• Global crypto asset adoption rates are significantly higher than previously estimated.
• The data generally suggest that both the US and Europe may be at the cusp of mass retail adoption – a situation often referred to as “Hyperbitcoinization” in the context of Bitcoin.
• Chances are that the growth of adoption will surprise to the upside due to the fact that we are most likely at the inflection point from ”Early Adopters” to ”Early Majority”.
Trump recently made a public statement implying that 50 million Americans already held ”crypto”. The most recent surveys among US consumers seem to support this number.
It is no surprise that cryptoassets have become a major topic during the US presidential election as the parties have become increasingly aware that cryptoasset users could play a significant role at the ballot.
Both Trump and Robert Kennedy Jr. are scheduled to deliver a pro-Bitcoin speech at the upcoming Bitcoin conference in Nashville over the weekend.
It seems as if cryptoasset users are not a small minority anymore that can be ignored.
Here are some recent US bitcoin and crypto adoption surveys for comparison (% of total population in brackets):
• Security.org: 93 mn (28%)
• Unchained: 86 mn (26%)
• Statista: 53.6 mn (16%)
• Morning Consult: 44.2 mn (13%)
• Finder: 38.4 mn (11%)
In general, cryptoasset adoption has been on the rise globally.
A recent global survey among institutional investors conducted by Fidelity even implies that 51% of surveyed institutional investors have already invested into cryptoassets such as Bitcoin.
Another recent consumer survey by Statista implies that approximately every 5th person (21%) worldwide has already invested into cryptoassets.
However, it’s important to highlight that among the top 10 regions with the highest adoption rates, 8 regions are developing countries.
So, cryptoasset adoption rates are even significantly higher among developing countries than in developed countries that often suffer from chronically high inflation rates and weak domestic currencies.
That being said, the data generally suggest that both the US and Europe may be at the cusp of mass retail adoption – a situation often referred to as “Hyperbitcoinization” in the context of Bitcoin.
The reason is that technological adoption in general tends to accelerate at the threshold from the so-called “early adopters” to the “early majority” which is around 16% adoption rate based on the model of technological adoption famously put forth by Rogers (1962).
Global adoption rates are already at 21% while adoption rates in the US and Europe are at around 16% and 14%, respectively. So, there is a strong case for an acceleration of adoption rates in these regions and globally over the coming years.
Recent political developments in the US also imply that Bitcoin and cryptoassets are gradually becoming mainstream.
Trump has recently endorsed domestic Bitcoin mining in the US and both Democrats and Republicans have started accepting crypto payments for campaign financing.
The big success of the spot Bitcoin ETFs this year and the fact that additional types of spot crypto ETFs are being launched marks a significant shift in sentiment among US regulators in this regard.
In short, chances are that the growth of adoption will surprise to the upside due to the fact that we are most-likely at the inflection point from ”Early Adopters” to ”Early Majority”.
Bottom Line
• Global crypto asset adoption rates are significantly higher than previously estimated.
• The data generally suggest that both the US and Europe may be at the cusp of mass retail adoption – a situation often referred to as “Hyperbitcoinization” in the context of Bitcoin.
• Chances are that the growth of adoption will surprise to the upside due to the fact that we are most likely at the inflection point from ”Early Adopters” to ”Early Majority”.
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