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Commodity basket inflows reach highest level this year


Inflows into commodity baskets rose by their highest level since early December 2015 (USD 27.3 million) says Morgane Delledonne, Associate Director – Fixed Income Strategist, ETF Securities. 

“Inflows into broad commodity baskets indicate stronger interest from investors, which is led by the gold rebound and energy,” Delledonne says.
“Precious metals benefited from the increased risk aversion following the release of the Fed’s minutes. Gold ETPs attracted larger inflows last week, USD118.6 million from USD96.8 million the week before, as investors scaled back expectations for further rates hikes in the US. The minutes of the Fed’s March FOMC meeting showed officials seeing persistent external risks and the threats they posed to the US economy. As a result, the odds of a rate hike in December have dropped to 48 per cent from 58 per cent earlier last week, based on Fed-fund futures data.
“Market participants now expect policy makers’ next move in February 2017. The increase of risk aversion and the subsequent decline of the US dollar versus Japanese Yen and Euro, led to the gold rally last week. Silver ETP inflows also increased last week reaching their four week high, marking seven consecutive weeks of increases.”
Morgane highlights that energy ETPs continue to attract strong inflows as do those for copper and aluminium.
“Ahead of the Doha meeting on April 17, oil prices advanced last week on speculation over whether an accord to freeze or cap output can be reached. Saudi Arabia said it will only agree to a freeze if other suppliers do so, while Kuwait said a deal can be done without Iran’s support. On the other hand, WTI crude oil ETPs received inflows worth USD15.3 million as US oil inventories were drawn down more than expected.
“Copper ETPs attract USD10.8 million of inflows amid declining price. Inflows into copper reached USD10.8 million last week reflecting investors bargain hunting after copper has declined 4.4 per cent last week to a six-week low of  USD4,630 per ton. In addition, aluminium ETPs inflows surged to their highest level in six months (USD12.7 million).
Looking to this week, Morgane adds: “Industrial production data in some of the world’s largest economies (US, Euro area and China) will give investors a gauge for how demand for commodities is faring. Additionally, markets participants will also be looking at retail sales and the Empire State survey of manufacturers in the US. Separately, inflation figures in the Euro area, UK and US will also be of greatest interest for investors. The Bank of England will conduct its monetary policy meeting on Thursday. The decision is broadly expected by market participants to remain unchanged (i.e. total asset purchases of GBP375 billion and base rate at 0.5 per cent).”

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