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ETF Securities reports fourth consecutive week for gold inflows

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Martin Arnold, Director FX & Macro Strategist at ETF Securities reports that gold inflows rebounded to their highest levels in 16 weeks, and the fourth consecutive week of inflows. Long Gold ETPs received USD65.4million which was the largest inflows across the commodity complex, he writes.

“The US dollar rally has stalled somewhat and US inflation breached the 2 per cent level for the first time since 2014. Inflation, and the US Federal Reserve’s ability to deal with it, is critical for the trajectory of gold in coming months, especially with the onset of the Trump-era fiscal spending policies. Prices could threaten the 3 per cent level in coming months and if the Fed doesn’t raise rates to counter, falling real interest rates will lift gold,” Arnold writes.
“Nonetheless, the ‘devil is in the detail’ for President Trump’s pro-growth policy framework, and whether the impact is felt in 2017, or as we expect, more likely in 2018 could limit gold’s gains.”

Emerging market bonds received the largest inflows in eight weeks last week with emerging government bond ETPs recording inflows of USD22 million last week, as investors continued to look to the EM space for better returns.

“Higher yielding EM bond ETPs have now posted the third consecutive week of inflows. Profit taking in short JPY ETPs reached the highest level since April 2016. Investors have reduced positions to the US Dollar against the Yen for the twelfth consecutive week, as the steep decline in the Yen appears to have lost momentum. Conflicting statements from incoming US Government policymakers have forced the dollar to trade a volatile range against the Yen over the past few weeks, with outflows from ETPs giving short exposure to the Yen against the Dollar totalling USD13.8 million last week.”

ETF Securities reports record inflows betting against commodity currencies, totalling USD7.4 million last week, amid hawkish comments from Fed Chair Yellen and concern that President Trump’s policies could exacerbate a Chinese growth slowdown. “Investors have funded record positions in favour of the US Dollar and against a basket of commodity currencies (Australian Dollar, Norwegian Krone, Canadian Dollar and New Zealand Dollar.)

“Bolstering such a trade is that oil prices remain near the top of recent ranges and with increasing production in the US, downside risk remains elevated.”
Finally, agricultural commodities received the largest inflows in six weeks,

totalling USD18.3 million. Of the inflows, diversified basket exposures accounted for 21 per cent, wheat 22 per cent and cocoa 49 per cent. Arnold writes that the trend toward diversified investing hasn’t been confined to agriculture alone: over the past month, the most significant inflows into the energy, industrial metal and livestock sectors have been via diversified basket ETPs.

“Bargain hunting appears to be the driver for cocoa, as it has been the worst performing agricultural commodity over the past year, and the only one to post a negative return over the past month.”

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