Assets in commodity exchange-traded products rose to an all-time high of USD207bn in Q3 2012 on the back of surging demand for gold ETPs, according to ETF Securities.
Aggressive moves by the US Fed and the European Central Bank (ECB) to ease monetary policy increased investor demand for hedges against further currency debasement.
Gold ETP assets rose to a new record of USD151bn, an increase of USD23bn during the quarter, the largest quarterly rise since 2Q 2010. Silver ETPs also saw a large increase in assets, with assets under management in silver ETPs rising USD5bn to USD20bn. Broad commodity ETPs saw a rebound in demand as investors started to feel more comfortable with the macro outlook following the ECB’s announced policy support for Spain.
Platinum ETPs also saw strong demand in 3Q, with new inflows of USD229m, bringing total platinum ETP holdings to USD2.9bn. Labour strikes in South Africa, which produces 80 per cent of the world’s platinum supply, reduced platinum supply causing a surge in the platinum price and investor demand during the quarter.
Industrial metal ETPs benefited from improved investor sentiment during the quarter, with net new inflows of USD81m. Broad diversified industrial metals ETPs saw the largest inflows, with inflows of USD116m. Total assets in industrial ETPs stood at USD1.9bn at the end of the quarter.
Agriculture ETPs, on the other hand, continued to see outflows, with net sales of USD77m. This is the fifth consecutive quarter of agriculture ETP selling, likely reflecting investors taking profits on the large price increases this year. Total assets in agriculture ETPs now stand at USD4.0bn
Energy ETPs saw USD627m of outflows in 3Q, primarily due to net selling of oil ETPs as prices rose and investors took profits. Natural gas ETPs saw modest net inflows as investors anticipated price gains on increased demand due to hotter than usual weather across the US this summer. Total assets in energy ETPs now stand at USD7.6bn.
Nicholas Brooks, head of research and investment strategy at ETF Securities, says: “The rise in commodity ETP assets to a new record in 3Q 2012 was primarily driven by strong investor demand for gold and silver ETPs to hedge against currency debasement as the world’s major central banks made clear their intention to extend current asset purchase programmes.
“Broad commodity and industrial metal ETPs also saw a pick-up in demand as central bank policies and improved US data helped boost interest in more cyclical assets. Agriculture and oil ETPs saw outflows as investors sold following strong price increases. As we move into the fourth quarter demand for gold ETPs has continued unabated as investors anticipate further central bank easing through the rest of the year and into 2013. The demand for broad commodity and industrial metal ETPs will depend very much on whether the recent improvement in sentiment towards Europe and US macro data proves to be sustainable or not.”