The weekly ETF flows report from ETF Securities finds USD107 million of outflows from their gold ETPs as geopolitical tensions eased.
The firm writes that US July retail sales and the Empire Manufacturing Index for August surprised to the upside and resulted in a strengthening of the US dollar and rising US bond yields last week, while putting downward pressures on the gold.
“The gold price pared losses in the later course of the week while the US dollar shed some of its gains amid concern about the outlook for President Donald Trump’s administration. President Trump’s announced that two business advisory councils were to shut down. On Friday, the gold price rose on higher demand for safe haven assets after the two terrorist attacks in Barcelona.”
ETF Securities writes that the minutes of the latest meeting of the FOMC reflected the lack of consensus within the Fed on the conduct of the next monetary policy actions. “In addition, the unclear commitments of Trump’s administration around pro-growth policy also lent weaknesses to the US dollar. Last week inflows into short USD-long EUR ETPs rose by USD3.6 million, despite the ECB’s concern about the strength of the Euro as revealed in the minutes of the July meeting. In aggregate there were USD13.3 million of inflows into short USD ETPs since the beginning of the month.
Turning to oil, oil ETP outflows continue for the fifth consecutive week, totalling USD214 million on the month. “Investors have withdrawn USD17.9 million from long oil ETPs, probably taking profits as crude prices are still up nearly 7.8 per cent over the past month. US crude production rose to a two-year high of 9,502 thousand barrels per day according to Energy Information Administration data on Wednesday, partly offsetting the efforts of the OPEC countries to scale down the global glut. We expect oil to continue to trade between USD40-55/bbl.”
Emerging Market government bond ETPs saw outflows last week after four weeks of consecutive inflows. ETF Securities writes that they saw USD21.5 million of outflows this week, while year-to-date inflows into emerging market debt ETPs remain elevated at USD63.7 million. After gains in local government bonds of around 11 per cent this year, investors are taking profit from the strong performance of EM debt in local currency since January in anticipation of a stronger US dollar that could challenge EM assets.