Martin Arnold, Director – Macro & FX Strategist, ETF Securities, has published a comment, focusing on why gold is the standout in the precious metals sector and why the outlook for crude ETPs is polarised.
“Crude inflows belie the polarised view on the outlook for oil prices. Abundant supply, being exacerbated by the Iran’s oil coming onto the market in coming months, is not a new story, and the major contributor to the year to date 9.1 per cent price declines,” he writes. “Bearish investors believe that capex cuts and rising demand will be insufficient to reduce inventory build-ups and have ploughed US24.9 million into short oil ETPs.”
“Meanwhile, there has been continued bargain hunting in the oil market. Bullish investors believe that the oversupply is ‘baked into the cake’ and have deposited USD81.5 million into long oil ETPs over the past week, the seventh consecutive week of net inflows. In contrast, futures market positioning reflects a somewhat more bullish perspective with net longs rising to a 10-week high for WTI crude. The sharp move higher last week reflected market rumours that Russia could join OPEC forces to restrain supply, thereby contributing to a more balanced market.”
Martin adds that month-long inflows show investors continue to look at gold for defensiveness.
“Gold continues to be an investor favourite as uncertainty over the global growth and the outlook for cyclical assets remains elevated. Gold’s defensive properties – historically the precious metal rallies during periods of equity market weakness – continue to be what investors are looking to gain exposure to. Physical gold ETP flows totalled USD35.6 million last week, the fourth consecutive weekly inflow, on the back of a 1.6 per cent price rise. Gold remains the standout in the precious metals sector, with inflows of USD150 million year to date, compared with modest outflows in silver and platinum group metal ETPs. Nonetheless, platinum staged a 8.5 per cent rally and ETPs garnered the first inflows in six weeks, totalling USD4.8 million.”