The weekly flows report from ETF Securities reveals that gold ETPs outflows of US$173 million were the highest since August 2015. Gold prices have come under increased pressure, dipping below the psychologically important USD1200 per troy ounce mark, owing to fears of the effect of additional rate hikes by the Fed in 2017 in response to higher inflation in the US.
The firm writes that they believe this scenario is unlikely, leaving investors susceptible to a highly volatile USD. Meanwhile rising equity markets and treasury yields following the euphoria surrounding Trump’s election victory are generating a higher risk appetite, further supressing gold’s price.
ETF Securties writes that investors are largely discounting the political uncertainty facing 70 per cent of Europe by GDP in the coming months when populists are rising rapidly in the polls. “While we expect further weakness in gold prices in the run-up to the rate hike, we view these price
points as a great buying opportunity given the ongoing risks of rising inflation and political uncertainty. Silver, known to be an industrialised precious metal,
remained the outlier among the precious metals complex, garnering inflows worth USD15 million.
After reaching a 17-month high, palladium ETPs saw USD5 million in outflows likely owing to profit taking. Johnson Matthey’s forecast of a 651,000oz palladium deficit in 2017 (up from 356,000oz in 2016), helped drive palladium prices 1.5 per cent higher last week, contrasting the price declines in the rest of the precious metals complex. Investors took profit on the best performing precious metal this year (up 32.7 per cent).Inflows into diversified ETPs rise to USD41 million, reversing the prior two weeks trend of outflows as investors invest in broad baskets to benefit from diversification.
ETF Securities reports that following the technical sell over the past two weeks, bargain hunters re-emerge into Emerging Market (EM) Debt ETPs. Inflows amounted to US$25m.“We maintain our view that EM countries have a stronger credit standing than what is commonly perceived, leaving room for further upside in prices.”
Optimism over the OPEC meeting prompted further inflows into oil ETPs totalling USD18 million, bringing the total inflow in the last four weeks to USD236 million. Oil is likely to remain volatile this week as the oil producing cartel decides on how to implement a production cut they agreed to in principle in September. With SaudiArabia indicating a production freeze is good enough, the market could well be disappointed this week, the firm says.