Aneeka Gupta, Associate Director, Equity & Commodities Research, ETF Securities by WisdomTree, writes that inflows into platinum ETPs staged a comeback last week, rising to USD15.7 million attaining its highest level in 37 weeks.
Bargain-hunters appeared to drive inflows into platinum ETPs after their prices dropped below the USD800 per troy ounce mark, sliding to their lowest level since December 2008 last week. From a fundamental standpoint, the platinum market is expected to see another year of surplus this year, dampening sentiment towards the metal.
However, platinum’s price discount appears excessive as its discount compared to gold has widened to a record high of USD440 and to its sister metal palladium at USD140 per troy ounce last week. Owing to their high usage in auto catalysts, platinum prices are likely to catch a tailwind from strong US vehicle sales, that rose 4.8 per cent year-on-year as reported last week by Ward’s Automotive Group.
Added to that, the EU is considering signing a multilateral agreement with other major car exporters in the US, South Korea and Japan to cut import tariffs on cars according to newspaper reports. If the agreement comes to fruition, it should help thwart the risk of lower demand for platinum from the trade dispute widening its scope to include cars, ETF Securities writes.
Outflows from gold ETPs rose USD16.5 million last week reversing the prior week’s trend of inflows as the strong US jobs report took centre stage. Gold prices came under pressure towards the end of last week as the US added more jobs than expected in June according to the latest payrolls report, keeping the Federal Reserve on track with its rate hike path this year.
“While we would expect the escalating trade wars to bolster gold prices, in reality its historically safe haven appeal has been dwindling for most of this year under the weight of the stronger US dollar.
“The further escalation of trade wars between US and China weighed on sentiment as broad industrial metal basket ETPs faced redemptions worth USD64.1 million last week for the third week in a row. US import tariffs on USD34 billion of Chinese goods went into effect last week and a retaliation of the same order is expected to follow from China on US based goods.
“Unfortunately, it’s not over yet, as US tariffs on another USD16 billion of imports from China is expected to be implemented soon. In addition to the higher uncertainty created by trade wars, the risk of a spiralling conflict between the US and China is threatening to derail global economic growth.
“Being pro-cyclical in nature, industrial metals ETPs outflows are resonating the apparent uncertainty amongst investors. Despite strong fundamentals for most metal markets, until some form of negotiated solution is reached, we expect the trade frictions to dampen prices further. Aluminium ETPs suffered outflows worth USD18 million falling to its lowest level since June 2016.
The risk of a shutdown of the mining industry in the Philippines, known as the world’s second largest nickel ore supplier, owing to environmental reasons helped nickel ETPs attract the second week of inflows worth USD5.3 million.”
Coffee ETPs attracted the highest inflows worth USD11.9 million since September 2013 after its deficit was revised higher by the International Coffee organisation (ICO). Arabica coffee prices jumped 4.54 per cent on Friday last week, posting its highest daily increase since June 23, 2017. The price rise was driven by ICO’s upward revision of the estimate of the global coffee deficit to 1.4 million bags from 254,000 bags for 2017-18 season after being in a surplus in 2016-17 season.