ETF Securities Weekly Flows Analysis – Investors seek to take profits on precious and industrial metals

• Investors are taking profits on gold and silver as they reach multi months highs
• Crude oil ETPs recorded moderate outflows as US refineries recover from storm Harvey
• Investors are taking profits on industrial metals after a two-digit price increase year-to-date

Investors reduced their long positions in gold and silver ETPs. We saw US$354.5mn and US$116.7mn out of our gold and silver ETPs respectively last week. The gold price is hovering around its highest level in twelve months, supported by the weakness of the US dollar and stock market declines. Fading market expectations of further Fed rate hikes, North Korea tensions and natural disasters are likely to prevent the US dollar from rising in the short term. Stanley Fischer, unexpectedly announced last week his resignation as Vice Chairman of the Fed for personal reasons. His departure from the Fed has increased uncertainty about the new governance of the Fed and the conduct of the future monetary policy. In addition, the ongoing bipartisan dispute over the increase of the US debt ceiling is also likely to lend further weaknesses to the US dollar as we move toward year end.

We saw US$26.3mn of outflows from oil ETPs as crude oil stocks are expected to rise. Oil prices gained 2% last week as refining capacity in the US increased after temporary shut-down in the wake of Tropical Storm Harvey. The US dollar weakened and talks between Russia and Saudi Arabia about a possible extension to the production cuts among OPEC producers added a tail-wind to crude oil prices. Hurricane Irma, ranked in the highest category, has reached Florida during the weekend, threatening the crude oil and natural gas production facilities and oil trading. The threat to pipeline infrastructure and refining capacity will again weaken crude oil prices and increase gasoline prices (as we saw on Friday). The US Department of Energy (DOE) weekly report has revealed a strong increase in US crude oil stocks in the week ending on the 1st of September as a result of Harvey. Hurricane Irma is likely to see crude stocks continue to rise while gasoline stocks decline.

Investors taking profits on industrial metals after prices slipped. We saw US$119.9mn of outflows from our industrial metals ETPs last week after metals experienced a moderate price correction on the back of falling US stock markets. While the overall global macroeconomic outlook remains supportive to commodity demand, prices are likely to face an unwind in speculative positioning as investors seek to take profit. Copper ETPs saw the largest outflows (US$65.5mn) since October 2014. Year-to-date, copper ETPs attracted US$41.7mn on the back of strong price performance (+18.4%).

Agriculture ETPs attracted US$43.3mn of inflows last week. A massive 8.1- magnitude earthquake hit Mexico’s southern coasts last Friday, causing tsunami waves. This natural disaster threatens production of Arabica coffee in Mexico and Central America, a region which accounts for 20% of the global output. The damages could slow down the upcoming harvest of Mexican coffee in October and possibly drive the price of coffee higher.

Video Presentation

Morgane Delledonne, Fixed Income Strategist 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.

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ETF Securities Research team
ETF Securities (UK) Limited
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