ETF Securities writes that Gold ETPs have received the largest inflows since May 2017, while silver ETPs saw the largest outflows since July 2016.
With gold holding its gains last week, investors increased their holding of the metal by USD64.7 million, the firm writes. A small miss in US ISM manufacturing figures and continued political volatility in the Trump Administration following the sacking of its Communications Director lent weakness to the US Dollar and support to gold.
“We believe that in the absence of shocks, gold will trade around current levels until the end of the year. However, should we get any shock events, gold could rise higher. Investors acknowledging this ‘hedge’ trait of gold are buying into the metal as a source of portfolio insurance. Meanwhile long silver ETPs saw outflows of USD58.3 million, as its price failed to hold onto gains from the previous week. As economic growth continues, we expect that silver will outperform gold by the end of the year, which could see inflows into silver resume.”
ETF Securities writes that inflows into Emerging Market government bond ETPs were the highest since January 2017. “Marking the third consecutive week of inflows into Emerging Market government bonds, inflows of USD18.6 million indicate that investor sentiment around emerging markets is continuing to grow.”
The firm also writes that gains in local government bonds of around 11 per cent this year, underpin the recent increase in sentiment. Last week was the third consecutive week of outflows from crude oil ETPs.
“Outflows of long USD75 million were the highest since May 2017. After the prior week’s gains in oil prices, investors continued to take-profit. By the end of the week, WTI oil had lost all its gains from the previous week. Investors continue to play a price range of USD40-55/bbl.
“When oil trades closer to the lower part of the range, we expect to see inflows resume. Recent price weakness comes as OPEC members are poorly conforming with their production limits. Kuwait and Russia are chairing a meeting today and tomorrow in Abu Dhabi with several OPEC and non-OPEC members participant in the deal to limit production. The spotlight will be shone on countries like Iraq, Gabon, Ecuador and UAE who are the cartel’s worst offenders.”
ETF Securities writes that investors are polarised on USD/EUR. Last week inflows into short USD-long EUR ETPs rose to USD6.2 million, breaking five weeks of outflows.
“Meanwhile inflows into short EUR-long USD rose to USD6.3 million, marking seventh consecutive week of inflows. In aggregate there were USD14.6 million of inflows into USD ETPs. Despite recent weakness in the US Dollar and strength in the Euro, we think the broader currency market has misjudged the reticence of the ECB and that confidence in aggressive tapering in coming months misguided. We feel the recent Euro strength will fade, while tightening policy in the US will drive the US Dollar higher.”
Finally, ETF Securities comments that Friday’s payroll report, which was considerably stronger than expected, should provide support to Dollar over the coming week, and reverse the weakness seen earlier last week.