Overview
Despite the relative strength shown by the manufacturing ISM, durable goods and payroll upward revisions, ETF Securities’ gold ETCs last week saw the largest weekly inflows since October..…
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Sentiment towards gold was likely boosted by the FOMC statement released last week which, while acknowledging the factors that led to the 4Q GDP growth slowdown were transitory, reiterated its commitment to keep monetary conditions accommodative for an extended period of time, removing some of the concerns built up about a possible sooner than expected roll-back of QE3.
ETFS physical gold ETCs record US$185m of inflows, the largest since October, as Fed re-iteration of its commitment to an extended period of monetary accommodation boosted sentiment. The gold price remains sensitive to the health of the US economy. With growth picking up, investor interest rate expectations have increased, weighing on the gold price. Despite these headwinds, low interest rates and central bank buying are likely to remain supportive for gold in 2013, with the US Fed signalling last Wednesday that it will continue providing stimulus to the economy as downside risks to growth persist. The more industrial precious metals also received inflows last week, with both silver and palladium ETCs seeing strong inflows and price performance. The Palladium price rose to a 16-month high on Wednesday on anticipation of a supply crunch due to the dwindling Russian stock sales.
ETFS Daily Short Copper (SCOP) sees the biggest inflow in its history, totalling US$59m, on disappointing US GDP numbers and high inventory levels. The weak data, coupled with recent price gains, prompted some investors to turn negative on the metal. While so far the high level of inventories has been overshadowed by the positive economic readings from China and the US, some investors appear to be focusing on the supply/demand fundamentals. Global inventories of copper tracked by the LME reached the highest level since December 2011 last week. At the same time, profit taking drove US$14m of outflows from ETFS Tin (TINM), as export restrictions in Indonesia, tin biggest producer, prompted the metal to rally up 5.9% last month. Overall, sentiment towards industrial metals and broad commodities remains positive with both ETFS Industrial Metals (AIGI) and ETFS All Commodities (AIGC) receiving strong inflows last week.
Profit taking drives US$10m of outflows from oil ETCs. Both WTI and Brent crude prices climbed to multi-month highs last week, as loose monetary policy and an improved global economic outlook provided support to oil prices. On the supply side, continued protests in Libya and the rest of the Middle East are likely to keep oil supply tight. At the same time, ETFS Leveraged Natural Gas (LNGA) saw US$12m of inflows on expectations of colder weather and high gas consumption. The US Senate is also discussing a legislation that wold allow natural gas exports to non FTA-nations. This would likely boost gas demand further, keeping prices supported.
Key events to watch this week: BoE and ECB rate decisions. Although investors aren’t expecting any change in BoE and ECB interest rate targets or the scale of asset purchases, the policy committee’s views on divergent economic data will be monitored closely. Earlier in the week, the US Congressional Budget Office’s Budget Outlook will be closely scrutinised given the upcoming April deadline for US politicians to agree on a budget. Chinese exports and new Yuan loans will also be monitored to assess the strength of China’s economy.
Source: ETFWorld.co.uk
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