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Fed dovishness leads to gold ETP inflows

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Gold ETPs recorded the second largest weekly inflows of the year as investors expect Fed dovishness to support prices further.

Gold ETPs recorded the second largest weekly inflows of the year as investors expect Fed dovishness to support prices further. ETF Securities writes that last week saw the second largest weekly inflows of the year into gold ETPs, at USD167 million into gold ETPs.

They write that this comes as investors expect further signs of dovishness from the Fed. The gold price rose by 1.45 per cent over the past week and 4 per cent since the Fed’s mid-March rate hike.

“We believe a dovish Fed will lead to further decline in real interest rates as inflation continues to rise, potentially sending gold price to USD1,300/oz by mid-year,” the firm writes.

As political uncertainty fades, investors have become optimistic about the Euro. “While the UK’s Theresa May will trigger Article 50 this week, starting the two-year negotiation period to leave the EU, the victory of the conservative party in the Netherlands and French candidate Macron taking the lead in the polls, fading fears of a rise of populism in Europe have supported the Euro. As a result, last week saw inflows of USD9.2 million in short USD long EUR ETPs.”
ETF Securities also writes that investors also reduced exposure to the Japanese Yen, adding USD8.7 million into long USD short JPY ETP.

Oil ETPs recorded net inflows for the fourth consecutive week, as prices continue to slide. Brent and WTI fell by 1.75 per cent on average over the past week, ending the week close to USD50/bbl for Brent while WTI was trading at a discount of around USD2.8/bbl. “We believe oil prices will continue to fall as Saudi Arabia’s domestic demand is likely to rise, reducing the probability of more output cuts in the coming months. Meanwhile in the US, rig counts, oil production and inventories continue to increase, exacerbating the oversupply trend and weighing on the price of WTI. Net speculative positions on both futures contracts declined by another 13 per cent on average the week before last, suggesting more downside pressure on oil prices in the near term.”

ETF Securities also writes that investor interest in thematic technology ETPs continues to grow with cybersecurity and robotic ETPs recording USD5 million and USD16 million inflows last week, alongside a price rise of 1.42 per cent for cybersecurity but a decline of 1.12 per cent for robotics. With the exception of one week, these ETPs have continuously recorded inflows since their launch, totalling USD142 million and USD401 million of assets respectively, the firm writes.

“Inflows in cybersecurity and robotic increased by 70 per cent and 103 per cent respectively year to date. Meanwhile, prices have increased by 13.4 per cent and 11.5 per cent respectively over the same period.”

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