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Gold remains investor’s favourite

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ETF Securities writes that gold remains the investor’s favourite, notching up a fourth week of inflows due to political and policy uncertainty.
The firm says that investors have been lured to gold’s defensive characteristics as the Eurozone remains mired in political uncertainty with Dutch and French elections just around the corner.

“Meanwhile the ECB has hinted at temporarily moving away from its capital key in order to subvert the problems associated with its limited pool of bonds for its quantitative easing programme. Expanding its QE activities is likely to heap pressure on the Euro and investors are looking to gold as a monetary devaluation hedge. Gold inflows were at a 30 week high, totalling USD192.1 million last week.”

In terms of oil, the firm writes that profit-taking in oil continues for fourth consecutive week despite OPEC production cuts. “OPEC Secretary General Barkindo indicated his optimism that the cartel can sustain a higher level of compliance than the 90 per cent reported in January. Investors, however, appear less than convinced: We believe that oil prices will remain under pressure in the near term as US oil production and inventories continue to grow. Outflows from oil ETPs last week totalled USD12 million mostly from WTI oil ETPs.”

Meanwhile, natural gas ETPs received largest inflows since June 2015 after prices dropped another 6.6 per cent. “Natural gas prices reached the lowest level since early November following unseasonably warmer weather in the US, leading to lower demand across all sectors. The sharp price declines have prompted bargain hunting by investors, with inflows totalling USD12.8 million – the largest inflows in 20 months.”

ETF Securities reports that copper has bucked the trend of industrial metal inflows, with largest outflows in 14 weeks. Profit-taking by investors totalled USD21.9 million last week. “The copper price has benefited from outages in mines that account for close to 12 per cent of global capacity. If these outages last for another few weeks, we are likely to see another year of a supply deficit in 2017. The deep capex cuts we have seen over the past few years will take longer to materially bite into supply and so copper inventory could remain elevated for several years.”

US Dollar ETPs recorded a third consecutive week of outflows, totalling USD7 million. A lack of clarity over potential policy from the Trump Administration is having a negative effect on investors, ETF Securities writes. “We expect further softness for the USD in coming weeks as the Fed holds of on rate hikes ahead of the release of President Trump’s budget release in mid-March.”

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