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ETC flows surge on strong interest in precious metals, oil and agriculture

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Exchange traded commodities continue to see strong inflows, with total flows rising by USD416m in the week to 30 January, adding to the previous week’s record-breaking inflows of USD581

Exchange traded commodities continue to see strong inflows, with total flows rising by USD416m in the week to 30 January, adding to the previous week’s record-breaking inflows of USD581m.

Total inflows in the first four weeks of 2008 are up USD1.3bn, with 57 per cent of the flows going into precious metals ETCs and 37 per cent into energy related ETCs.

Physical gold and oil ETCs have been the key drivers, though agriculture and other commodities are starting to see increased interest.

Trading volumes surged to USD1.1bn last week, back towards July 2008 levels.

ETF Securities says the sharp rise in flows reflects investors demand for hard assets in an environment of extreme financial uncertainty, the strong long term fundamentals of a number of commodities, and the security of holding physically-backed and fully collateralized ETCs.

New flows into agriculture ETCs continued to rise last week, with total inflows up USD10m and flows into ETFS Wheat up USD5m alone.

Total inflows into agriculture ETCs have risen by USD80m since the beginning of the year with 60 per cent of the flows going into ETFS Agriculture, an ETC that gives investors exposure to the returns of a broad basket of grains and soft commodities.

ETF Securities believes increased interest in agriculture ETCs is likely being driven by the sector’s historically low correlation to the business cycle and other asset class returns and the sector’s generally favourable long term fundamentals.

Last week flows into precious metals ETCs continued to surge, with flows into ETFS Physical Gold and Gold Bullion Securities rising by USD244m. Flows into these two ETCs plus the Gold Bullion Securities product listed in Australia have risen by USD982m in just the past ten weeks. Assets under management in ETFS’ physical gold ETCs now stand at nearly USD6bn.

The gold price remains a strong performer, with ETFS Physical Gold rising by five per cent last week alone and up 22 per cent since end of October 2008 – an annualized return of 76 per cent. Gold is up 37 per cent in sterling and 15 per cent in euros over the past 12 months.

Platinum and palladium have also seen a turnaround in fortunes recently, with prices up 5.9 per cent and 6.5 per cent respectively in the week ending last Friday. Flows into ETFS Physical Platinum picked up sharply last week rising by over USD10m, bringing total inflows this year to USD23m. Assets in the ETC now stand at USD175m.

Oil ETCs have also continued to see very strong interest. Combined flows into ETFS Crude Oil and ETFS Brent rose by USD101m last week. This follows on USD143m of inflows into long oil ETCs the previous week and brings total flows since the beginning of December to USD730m.

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