ETF Securities Weekly Flows Analysis – Green means go for industrial metals

Highlights

• Industrial metal ETPs recorded the largest weekly inflows since summer 2014.
• Robotic ETP continues to record inflows on better-than-expected earnings seasons
• Gold and oil ETPs recorded outflows as price continue to rise.
• Inflows into silver ETPs, benefitting from the attractiveness of industrially based metals.

Industrial metal ETPs recorded the largest weekly inflows since summer 2014. Industrial metal ETPs were on the top of the leader board last week with a record inflow of US$112.9mn, the largest weekly inflow since August 2014. Investors increased their exposure to the basket and copper with US$77.3mn and US$34.5mn inflows, respectively. Nickel was the best performer last week with a price rise of 4%, followed by copper (3.3%) as both metal supply deficits were reported higher than last year according to their respective international study groups. Beyond the supply deficit, investors have been more sensitive to climate change with the latest Global Carbon Project report highlighting that carbon emissions will increase by 2% this year which makes the 1.5°C global target cap unlikely. We believe more investment into green projects, renewable energy and electric vehicles is very likely. This could be the beginning of a long-term trend that will benefit copper, nickel and other base metals.

Robotic ETP continues to see inflows on a better-than-expected earnings season. Last week saw US$49mn inflow into the robotic ETP, bringing the fund’s asset under management above US$1bn. 92% of the constituents of the Robotic index have reported earnings as of last week among which 62% are beating expectations, representing an earnings beat margin of 12%. The Robotic index price-to-earnings ratio is currently 29.8x above its historical average. However, the index continues to trade at a discount to the MSCI World IT index.

Gold and oil ETPs recorded outflows on profit-taking as prices continue to rise against market expectations. Last week saw oil and gold ETPs recording outflows of US$21mn and US$31mn, respectively as oil prices reached new highs. Meanwhile, the gold price closes in on the US$1,300/oz. mark, despite some potential downward pressure ahead of the Fed December rate hike. Despite US oil production now being above its 2015 peak, WTI rallied by 4.2% last week, potentially on larger-than-expected decline in US oil inventories, while Brent rose by 1.8%, reducing its premium to WTI to US$4.9/bbl. Brent prices underperformed as Saudi Arabia exports increased in November compared to the September and estimated October levels, despite cuts in oil allocations of 560,000 barrels per day in November. Long WTI ETPs saw US$14.5mn outflows while US$5.9mn were withdrawn from long Brent ETPs.

Silver ETPs recorded the largest weekly inflows since September, benefitting from the attractiveness of industrial metals. Around 8% of silver consumption is used in the making of photovoltaic cells. This share is likely to increase in the next decade as the world makes the transition to a low-carbon economy. Silver, among other base metals, is likely to benefit from the demand boost. Last week saw US$8.6mn into silver ETPs despite little movement in price.

Video Presentation

Edith Southammakosane, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

For more information contact

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

Important Information

General

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).

This communication is only targeted at qualified or professional investors.

The products discussed in this communication are issued by ETFS Commodity Securities Limited (”CSL”), ETFS Hedged Commodity Securities Limited (”HCSL”), ETFS Hedged Metal Securities Limited (”HMSL”), Swiss Commodity Securities Limited (”SCSL”), ETFS Foreign Exchange Limited (”FXL”), ETFS Metal Securities Limited (”MSL”), ETFS Oil Securities Limited (”OSL”), ETFS Equity Securities Limited (”ESL”), Gold Bullion Securities Limited (”GBS” and, together with CSL, HCSL, HMSL, SCSL, FXL, MSL, OSL and ESL, the ”Issuers”) and GO UCITS ETF Solutions Plc (the ”Company ”). Each Issuer (apart from SCSL) is regulated by the Jersey Financial Services Commission. The Company is an open-ended investment company with variable capital having segregated liability between its sub-funds (each a ”Fund”) and is organised under the laws of Ireland. The Company is regulated, and has been authorised as a UCITS by the Central Bank of Ireland (the ”Financial Regulator”) pursuant to the European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations, 2003 (as amended).