Gold price ebbs and flows on back of macro pressures

In its weekly flows analysis, ETF provider ETF Securities writes that last week saw the price of gold peaking above USD1,290/oz. for two days as the US dollar came under pressure ahead of the testimony of former FBI chief Comey and following tensions in the Middle-East.

The firm writes that pressure on the gold price surprisingly faded away on Thursday despite the lack of details from President Draghi about how and when tapering will occur and despite elevated instability in UK politics following the results of the general election.

Both would normally be price supportive for gold and therefore a source of gold-buying. Gold ETPs instead recorded further outflows on Friday with the total outflows for the week reaching USD59.6 million.

Uncertainty around the ongoing Brexit negotiations saw investors pile into short GBP ETPs. ETF Securities writes that the supposedly easy win turned into a shocking disappointment on Friday as the UK prime minister lost her majority in parliament.

“The USD7.4 million inflows into short GBP ETPs indicate that investors are expecting further depreciation in the currency mainly against the US dollar in the near term. We however believe that a softer Brexit should be positive for the Sterling in the longer run.”

Robotic and cybersecurity ETPs saw strong inflows over the week with USD36.5 million in cybersecurity ETP, the largest weekly inflows since inception. ETF Securities believes that this is a result of the massive ransomware cyber-attack that hit nearly 100 countries on the 12th of May. Since then, the ETP has recorded double digit inflows (in USD million) every week, totalling USD81 million. Robotic ETP recorded USD8.9 million in inflows last week.

Last week saw nearly USD42 million of inflows in oil ETPs as the price of oil continues to slide. Long WTI crude ETPs received most of the flows (USD38.3 million) as prices near USD45/bbl. While USD12.6 million went into long Brent crude ETPs.

The firm writes that the blockade of Qatar from four Arab nations including Saudi Arabia failed to support prices as the country is a very small producer of oil. US oil inventories, on the other hand, rose by 3.3 million barrels last week against market expectations, the first increase of stockpile since end of March 2017.

Finally, turning to industrial metal ETPs saw further outflows on China debt downgrade and a slowdown in China metal consumption. In addition to Moody’s downgrade of China’s sovereign debt three weeks ago, China domestic consumption of metals in the year to March 2017 declined for the first time since July 2016 according to the latest data from the World Bureau of Metal Statistics.

ETF Securities writes that the investment case for industrial metals remains however solid as the Chinese economy stabilises and as domestic balance remains in deficit.

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Beverly Chandler
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