ETF Securities Weekly Flows Analysis – Precious metal ETP flows strengthen as trade tensions continue

Highlights

• Bargain hunters continued to drive strong inflows into gold ETPs – worth US$16.1mn – supported by ongoing trade tensions and geopolitical risks.
• Crude oil ETPs faced redemptions worth US$32.7mn, the highest level in five weeks, on the back of profit taking as oil prices rose for the second week in a row.
• Outflows from nickel ETPs widened the most in 3 weeks as prices rose over concerns of further US sanctions on Russia.

Bargain hunters drove US$16.1mn of inflows in gold ETPs, marking two consecutive weeks of inflows. Gold prices came under pressure as bond yields rose sharply. The yield on the 10-year Treasury, rose to 2.96% the highest it’s been since January 2014 following supportive comments by the Fed governor Lael Brainard, for continued gradual increases in the Federal Funds rate. Added to that, the Federal Reserve Beige book showed a solid outlook for the US economy, while noting concerns over a potential trade war. Silver ETPs received US$12.8mn, marking the fifth consecutive week of inflows. Silver prices were lifted higher by industrial metals strong performance last week and managed to outperform gold by a strong margin of 3.5%. The gold/silver ratio for a time reached 78, its lowest level since early January.

Crude oil ETPs faced redemptions worth US$32.7mn, the highest level in five weeks, on the back of profit taking. Brent crude oil price reached US$74 per barrel last week, a level last seen in November 2014. The price appreciation has been supported by a trifecta of reasons – the decline of US crude oil inventory by 1mn barrels reported by the American Petroleum Institute (API), OPEC’s commitment to production cuts and ongoing geopolitical tensions. According to the Joint Technical Committee (JTC) of those OPEC and non-OPEC countries participating in the cuts, the oversupply in the oil market is nearly over. OECD stocks are likely to dip below the five year average over the coming quarter. Prices eased a little on Friday as President Trump accused OPEC of driving up oil prices artificially. This accusation comes at a critical time for Saudi Arabia. The country needs a high oil price ahead of an IPO of its state oil company, Saudi Aramco which is seen as an important step to spearhead the restructuring of its economy.

Industrial metal basket ETPs received inflows worth US$3.9mn, in stark contrast to outflows from copper, nickel and aluminium ETPs of US$4.6mn, US$14.1mn and US$5.3mn respectively. Outflows from nickel ETPs widened the most by US$14.1mn over the last three weeks on the back of profit taking. Nickel prices rose 7.5% on Thursday marking their highest daily increase in 6½ years and putting prices at their highest level since December 2014 owing to concerns of further sanctions being imposed by the US on Russia.

European equity ETPs faced outflows worth US$5.7mn extending the prior week’s trend of outflows as investors took profits ahead of the European Central Bank meeting this Thursday. Given the raft of mixed macro-economic data in Europe, investors will be looking out for further guidance on its asset purchase program.

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