ETF Securities writes that last week saw gold, platinum and silver ETPs with USD82 million in inflows in precious metals ETPs, led by gold (USD46.8 million), then silver (USD23.9 million), platinum (USD6.8 million) and the basket (USD4.1 million).
Janet Yellen’s comments last week on inflation cast some doubts among investors on whether the US Federal Reserve (Fed) will continue hiking rates by another quarter point this year, the firm writes. US headline inflation for June fell by 0.1 per cent while core inflation came as unchanged at 1.7 per cent. The gold price, as a result, rose by 1.2 per cent over the past week.
ETF Securities writes: “We however remain cautious and see a small 2.3 per cent increase in the gold price for year-end. The price of gold is also a key driver of silver and platinum prices. With no evidence of industrial demand recovery, we believe both industrial precious metals will continue to benefit from the demand for safe haven assets. We believe silver still has upside potential by year-end while we see palladium near the top of its potential.”
Meanwhile, industrial metals ETPs saw another week of inflows as manufacturing PMI continues to grow in the US and in the Eurozone. Last week saw USD31.5 million in industrial metals amid growing economic activity in the US and Eurozone with manufacturing PMI at 57.8 in the US and 57.4 in Europe in June.
ETF Securities writes that investors favoured exposure to the basket for its diversification benefit (USD24.1 million). “While the Chinese market deficit of industrial metals has reduced by 17 per cent compared to its level in April 2016 according to the World Bureau of Metal Statistics, we believe infrastructure spending in China and India needs to respectively double and triple in order maintain current GDP growth rate which should be price supportive for the entire complex.”
Inflows into oil ETPs returned after a week break as oil inventories in the US decline further. “Oil ETPs recorded USD12.9 million inflows last week on the back of falling oil inventories in the US by 7.5mn barrels. US oil production, on the other hand, rose for the second consecutive week and is only 2.3 per cent below its peak in June 2015.
OPEC’s latest release also reported an increase in oil production, threatening the OPEC and non-OPEC agreement as some producers look to have opened the tap again. Compliance to the agreement dropped to 78 per cent according to the IEA.
The Euro and US dollar were hit by a shift in investor’s sentiment last week with long EUR ETPs recording USD8.6 million of outflows last week and short EUR ETPs USD3.3 million inflows.
“In the face of weak inflation pressure and futures market positioning at the highest level in over six years, we believe there are downside risks for the Euro. In addition, we expect the European Central Bank to remain cautious on the extent of the discussion over tapering at this week’s policy meeting” ETF Securities writes.
