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Political tension in the US drives precious metals inflows

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The weekly ETF flow update from ETF Securities sees precious metals inflows continue to rise for a second week at USD126 million, on the back of political uncertainty.

Gold, with inflows of USD50 million, and silver – USD73 million – ETPs had another strong week with the main catalyst being the increasing political tension in the US, starting with President Trump’s dismissal of his FBI director and then culminating with congress appointing a special prosecutor to investigate possible Russian involvement in the US election.

ETF Securities writes that, with some questioning whether the Trump administration can survive its full-term, safe haven assets such as bonds and precious metals rallied last week.
“Silver ETPs continue to see investor interest as the gold-silver price ratio still looks elevated relative to recent history. We continue to have a favourable view on silver fundamentals as production has fallen in recent years creating a supply deficit. Silver production, including mine production and scrap, fell 32.6 million ounces between 2015 and 2016,” the firm writes.

The unprecedented global cyber-attack of the previous weekend drove technology ETPs global equity inflows up to USD30 million. Robo also saw inflows at USD16 million. ETF Securities writes that the Tech sector more generally continues to lead equity performance, as tech earnings in the US have come in better than expected. The firm writes that 82 per cent of tech companies have so far beaten estimates, one of the strongest sectors in the S&P 500.

Turning to currencies, the US Dollar index (DXY) has had its worst week in 10 months as the political tumult in the US sent bond yields lower, ETF Securities says. “Nevertheless, the USD ETP had inflows of USD8 million last week as investors took the opportunity to buy the US Dollar ahead of the June Federal Reserve Meeting in three weeks’ time. Currently the futures market is assigning nearly 100 per cent probability to a hike at the meeting.”

The firm reports that the primary buying came against the Euro which broke the EUR1.10 level following President Macron’s inauguration. “Since April, there have been five straight weeks of inflows in the USD ETP since mid-April, totalling USD50 million.”

Last week saw industrial metals reverse outflows. There were USD21 million inflows into the Industrial Metals basket ETP and USD11 million into the Copper ETP following China’s announcement last week that it would invest an additional USD20 billion to the Silk Road Fund which seeks to boost infrastructure and trade links with the rest of the world.
ETF Securities writes that in contrast, the China A-share equity ETP saw USD8 million of outflows as tighter liquidity conditions continues to drag on the A-share market which is down -1 per cent YTD.

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