Precious metal ETPs surge to US$80mn…
Long EUR short USD ETC positions surge to their highest level in 25 weeks.
Gold ETPs made a comeback with US$30mn of inflows after gold prices posted their first weekly gain in four weeks. Sentiment towards gold remains volatile owing to pressure from a firm US dollar and a rising 68% probability for a December rate hike in the US, increasing the opportunity cost of owning gold. Historically, it is expectations of a rate hike that have been supportive of the US dollar and generally negative for commodities, although once rate hikes have occurred, this trend typically reverses. Despite strong fundamentals and increasing uncertainty ahead we expect the trajectory of gold prices in the short-term to remain volatile as investor appetite remains polarised. Net long positions for gold remain at a 71/2-month low according to latest data from Commodity Futures Trading Commission (CFTC).
Platinum ETP inflows rose for the fifth consecutive week to US$32.4mn, marking its highest inflows since April 2016. The platinum price is showing relative weakness as the discount on platinum versus gold is now at $337.5 per troy ounce, close to the highs last seen on 27 June 2016. In our view strong demand from the global auto sector amidst stringent emission standards and continuation of the supply deficit for the fourth year in a row should support prices.
Outflows from energy ETPs declined for the fifth consecutive week to US$30mn, led by crude oil ETPs. Growing concerns over the credibility of OPEC’s announced production cuts were sparked by comments from Russia’s largest oil producer, Rosneft claimed that Russia could step up its oil production by 4mn bpd sending Brent crude oil prices lower last week. The US Department of Energy reported an unexpected fall in crude oil stocks of 5.2mn barrels owing to a slump in crude oil imports, which was even more significant than the 3.8mn barrels decline reported by American Petroleum Institute (API). Supportive inventory data helped WTI crude oil prices gain 1% last week, prompting further profit taking on crude oil ETPs that declined for the fourth week in a row.
Agriculture ETPs suffered the largest outflows since the start of 2016 amounting to US$19mn, driven by outflows from broad agriculture basket and coffee ETPs. The Arabica coffee price has risen by 40% since its lows at the start of the year owing to a tight supply situation. While Columbia has recorded its best crop in 23 years and Vietnam has also recorded a 3.8% increase in production, a lower crop is anticipated in Brazil (the world’s largest producer of coffee), next year raising the prospects of further upside.
Long EUR short USD ETC Inflows increased by US $16.2mn, as the US dollar continued to trade higher last week following the sharp weakening of the Euro in response to European Central Bank (ECB) easing signals at last week’s policy meeting.
Key events to watch this week. Q3 earnings releases take centre stage and GDP data for the US and UK is to be released on Friday.