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Gold ETP sell off as Fed gets hawkish

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Last week investors sold gold as the hawkish Fed sent the price lower according to ETF Securities in their weekly flow analysis.

Last week investors sold gold as the hawkish Fed sent the price lower according to ETF Securities in their weekly flow analysis. The firm reports USD96.3 million of outflows from long gold ETPs last week.

This was the first weekly outflow in five weeks. The Fed Fund futures implied probability of a rate rise this month went from 40 per cent at the beginning of the week to 90 per cent by the end of the week.

Better-than-expected ISM manufacturing, consumer confidence, durable goods orders and core PCE inflation data released last week was seen to provide the Fed ammunition, ETF Securities writes.

A strong reading in this week’s payroll data may give another reason for the Fed to move higher at its March 15th meeting. While gold held steady in the first half of the week amid the burgeoning political risks around Europe, Macron’s announcement of his policy platform unwound part of the ‘fear trade’ as markets cheered on his centrist appeal.

Gold ended the week 1.8 per cent down. “We still believe that even if the Fed raises rates this month, elevated inflationary pressure will keep a lid on real interest rates, which will be gold price supportive in the first half of the year.”

ETF Securities writes that technology themed equity ETPs continue to gain favour. Inflows into robotic and cybersecurity themed equity ETPs continued unabated last week with USD7.9 million into robotics and USD16.2 million into cybersecurity ETPs. Inflows into cybersecurity were at their highest since inception.

“We saw the first weekly inflows into crude oil ETPs in five weeks as investors bought USD20.9 million of long oil ETPs on a price dip of 1.2 per cent,” ETF Securities writes.

“Despite OPEC’s efforts to cut production, US oil continues to grow and inventories are elevated, weighing on oil price.”
Within industrial metals there was some diversification last week. “While investors sold USD15.5 million of nickel and USD12.5 million of zinc ETPs, they bought USD15.9 million of diversified industrial metal basket ETPs.

The firm concludes that picking the individual winners in industrial metals appears more difficult when prices are so volatile, but the broad theme of tightening supply and rising demand is set to benefit the commodity sub-sector.

Last week saw the largest inflows into short FTSE ETFs since July 2016, ETF Securities says. “Inflows into short FTSE ETFs of USD5.8 million were the highest since the post-referendum month of July 2016. As the House of Lords rejected certain parts of the Brexit Bill, the market is preparing for continued tussles between the government and the second chamber of parliament.”

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