Commodities ETP round-up: Investors abandon gold but favour oil and PGM

Nov 26th, 2015 | By | Category: Commodities

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ETF Securities, a leading provider of commodity-based exchange-traded products, has released its latest weekly multi-asset research report highlighting trends in commodities markets. The following is a summary of the main moves over the week.

Commodities ETP round-up: Investors abandon gold but favour oil and PGM.

Commodities ETP round-up: Investors abandon gold but favour oil and PGM

Despite weekly falls in oil, platinum and palladium ETPs, net inflows across all three commodity types highlight investor perception of bargain buying.

Investors’ patience with gold ETPs wore thin last week as further price declines prompted the first net outflow from gold ETPs in ten weeks, signalling a change in investor sentiment in the yellow metal. Meanwhile, despite slight price declines in oil-based and platinum-group-metals (PGM), significant net inflows were recorded across all ETPs tracking these commodities, as investors who were bargain hunting placed bets on upcoming price reversals.

Despite global demand for gold receiving boosts from Chinese imports (currently at a 7 month high) and Diwali celebrations, whereby gifts of golden jewellery are commonplace, the gold price has failed to rally; the ETFS Physical Gold fell by 0.4% last week. This appears to be the last straw for investors anticipating a bounce in gold prices as gold ETPs broke a 10-week long run of net inflows to register net redemptions of $70.6m. Expectations of a rate hike in the US appear to have once again become a dominant theme in gold ETPs ahead of the next Federal Open Market Committee meeting scheduled for December.

Meanwhile, the first net creations of PGM ETPs (specifically platinum and palladium) were recorded since the beginning of August. Despite both metals showing losses over the previous week (ETFS Platinum fell 2.2% while ETFS Physical Palladium fell 6.0%), investors appear to believe the repercussions of the Volkswagen emissions scandal have now been fully priced in. Furthermore, research from Johnson Matthey, a British multinational chemicals and sustainable technologies company, pointed to a larger expected PGM deficit in 2016 due to key supply constraints.

A similar picture was seen across oil-based ETPs; ETFS Brent 1mth fell 2.3% and ETFS WTI Crude Oil fell 3.1%; however, ETPs tracking Brent Crude and WTI recorded net inflows of $15.5m and $64.7m respectively, up 42% and 39% compared to the previous week. Falling prices appear to have attracted investors seeking bargains. In line with expectations of a price rebound, ETFS Daily Short WTI Crude Oil saw outflows of $1.2m last week.

Potentially strengthening the conviction of investors who have bet on an upwards trending oil market, Edith Southammakosane, Director – Research Analyst, ETF Securities, commented: “After seven weeks of sharp increases, US oil inventories growth slowed last week, up by only 252,000 barrels. In its November issue of the Short term Energy Outlook, the Energy Information Administration projects that while the global oil supply will remain in surplus next year, it will stabilise at around 95.5 million barrels per day on the back of declining oil production in the US and in Canada. Inventory build-up in the US is also expected to slow down next year.”

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