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ETF Securities reports GBP1bn in ETC inflows over seven weeks


Exchange traded commodity provider ETF Securities has reported inflows totalling GBP1.15bn into ETCs over the 11 weeks going back to 7 November, with gold and oil products accounting fo

Exchange traded commodity provider ETF Securities has reported inflows totalling GBP1.15bn into ETCs over the 11 weeks going back to 7 November, with gold and oil products accounting for 90 per cent.

More recently, agriculture ETCs have also begun to experience significant inflows.

The strong inflows are a result of both commodities low to negative correlation with equities, and also the robust structure of ETCs.
Because of the current financial environment, investors are now demanding liquid, transparent and secure structures to safeguard assets. As a result, ETF Securities experienced its largest weekly inflow into ETCs ever. A total of USD581m (GBP430m) flowed into ETCs last week, of which 63 per cent went into physical gold ETCs, 20 per cent into oil ETCs and 10 per cent into agriculture ETCs.
Last week, inflows into ETFS Physical Gold and Gold Bullion Securities were the largest weekly inflows on record – 420,000 ounces worth of ETCs were issued, equivalent to the quarterly production of the world’s sixth largest gold company.

Combined, the assets of Physical Gold and Gold Bullion Securities now total USD5.3bn (GBP3.9bn) or six million ounces.

Last week, the gold price rose from USD835/oz to USD899/oz, a weekly increase of eight per cent in USD terms and a weekly increase of 15 per cent in GBP terms. And despite falling equity prices, ETFS Russell Global Gold Fund, an exchange traded fund was up nine per cent in USD last week (15 per cent in GBP) and 106 per cent since 27 October 2008, outperforming the FTSE 100 Index by 114 per cent in USD terms.
A significant departure from the past few weeks was new investment into agriculture ETCs. In total, USD56m (GBP42m) was invested across a range of agriculture ETCs with ETFS Agriculture DJ-AIGCISM taking in USD48m (GBP36m) and ETFS Wheat taking in USD6m (GBP4.5m).

Last week was the largest weekly inflow into agriculture ETCs since April 2008. Agriculture is beginning to receive renewed interest from investors as it is widely perceived to be more independent of the current financial crisis. In addition, inventories of a number of agriculture commodities remain at or near historic lows, while there has been some reduced plantings and poor weather in North and South America recently. As a result, all agriculture ETCs are up by around 20 per cent since early December.

Since 5 December, agriculture related equities have also outperformed with the ETFS S-Net ITG Global Agri Business Fund ETF up 14 per cent since 5 December 2008, outperforming the FTSE 100 Index by 20.1 per cent in USD terms.

Long oil ETCs continue to receive significant net inflows with oil remaining below USD50 per barrel. Last week, a further USD143m (GBP106m) of inflows were received into oil ETCs with ETS Brent Oil and ETFS Crude Oil remaining the two largest oil ETCs with USD236m (GBP175m) and USD377m (GBP279m) respectively.

ETFS Leveraged Crude Oil remains the largest leveraged ETC with USD84m (GBP62m) of assets. In total, there have been net inflows into oil ETCs of USD629m (GBP465m) since the start of December, resulting in asset growth of 450 per cent to total USD808m (GBP596m).
Exchange volumes for ETCs have increased across all exchanges despite falling commodity prices and up to a 50 per cent fall in equity trading volumes.

In 2008, the USD value of ETC trading volumes on the London Stock Exchange increased 22 per cent compared to the same time last year, while ETC trading volumes on the Deutsche Borse, Borsa Italiana and Euronext are up 200 per cent, 46 per cent and 77 per cent respectively.

In total, weekly ETC trading volumes are up by 31 per cent to USD600m (GBP444m) since January 2008.

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