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Gold’s safe haven status revitalised

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ETF Securities comments that the depreciation of the Yuan against the US dollar by 3.4 per cent last week, caused by reform to the fixing method, sent reverberations across commodity markets, revitalising gold’s safe haven status.

The firm writes that in addition the sluggish European GDP data sparked concerns on the strength of the European economic recovery. The firm predicts that the Purchasing Managers’ Index (PMI) data in Europe and industrial production figures will remain in focus this week.
 
Long WTI and Brent crude oil ETPs received USD 48.2 million and USD12.0 million
respectively marking the seventh consecutive week of inflows into oil ETPs.
 
ETF Securities writes: “The monthly report by Organization of Petroleum Exporting Countries (OPEC) confirmed that OPEC continues to keep the world oversupplied as their collective output surpassed 31.5 million barrels per day (mb/d) compared to their target of 30 mb/d. Bargain hunters took support from the monthly International Energy Agency (IEA) report that revised the 2015 global growth outlook upwards, raising demand expectations by 1.6mb/d in 2015, by the fastest pace in five years.”
 
 The weekly US Energy Information Agency (EIA) report showed US crude oil supplies fell by 1.7 million barrels, just shy of expectations. “However EIA crude stocks are 86.5 million barrels above year ago levels and 93.2million barrels above the five year average. The WTI crude oil price fell to a 6½ year low of US$41.3 per barrel considerably lower than its global counterpart Brent oil that hovered below USD50 per barrel leading to a widening price gap USD7 per barrel, last seen in May 2015” the firm writes. “This has been blamed on rising storage levels at Cushing.”
 
Crude oil imports for the week stood at 7.5mb/d compared to 7.18mb/d the previous week. “Evidently China took advantage of lower oil prices by importing a record volume of 30.71 million tons of crude oil in the first seven months of the year up 10 per cent since a year ago.”
 
In terms of gold, outflows of USD106.2 million from gold ETPs marked the 13th consecutive week of redemptions. China’s change in currency policy lent support to gold, which rose to a three-week high of USD1120/oz. “ETP investors took profit, reaccelerating redemptions, which seemed to have slowed the week prior. The World Gold council (WGC) highlighted just how weak demand for the yellow metal was in Q2, with
consumer demand in India and China falling 25 per cent and 3 per cent respectively. The industry body however expects current low prices to ignite consumer demand in these countries in a similar way to 2013.”
 
ETF Securities reports that agricultural ETPs continue to see strong inflows. ETFS Agriculture (AIGA),ETFS Wheat (WEAT) and ETFS Corn (CORN) each saw their third consecutive week of inflows, of USD6.6 million, USD2.3 milion and USD2.6 million respectively.
 
“In its latest monthly report, the USDA raised its US corn production forecasts by 1.2 per cent driving its price down 1.6 per cent over the week. However, with an intensifying El Nino likely to disrupt production later this year, ETP investors accumulated positions in corn in anticipation of a price rebound.”
 
Outflows from ETFS leveraged Coffee (LCFE) rose to the highest level in ten weeks. Arabica coffee prices rose 10.3 per cent last week, driving profit-taking. “Prices rose despite IBGE, the Brazilian government’s official statistics institute raising its forecast by 800,000 bags for the Brazilian coffee crop to 44.2 million bags.
 

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