ETF Securities reports third consecutive week of long gold outflows

ETF Securities’ weekly flows report reveals that bargain hunting drove USD79.7 million into long crude oil ETPs last week as crude oil slipped 3 per cent as US inventories withdrawals continued to disappoint.

The firm writes that gasoline stocks increased, bucking seasonal trends. “IEA data released last week shows that year-to-date OECD stocks have increased 360 kb/d despite OPEC’s efforts to cut back on production. OPEC figures show that the cartel’s production increased in May – a risk we have highlighted for some time. Oil is currently trading in the lower half of the USD40-55/bbl. trading range that the commodity has been stuck in. Bargain-hunting at these low prices drove the highest inflows in five weeks.”

Last week saw the third consecutive week of long gold ETP outflows, at USD27.2 million. ETF Securities writes that expectations for continued rate increases and central bank balance sheet normalisation in the US after a surprisingly hawkish statement from the Federal Reserve last week sent gold prices lower after peaking at USD1295/oz on 6th June.

“However, as we observed in the previous week, geopolitical events can be supportive for the gold price. Gold tends to be the first port of call in the times of investor anxiety. The closure of the border between Saudi Arabia and Qatar, Ex-Director James Comey giving testimony to Senate, UK elections and Greek debt negotiations were all factors creating investor anxiety in previous weeks. Investors with an allocation to gold could find it a valuable event risk hedge. In the absence of shocks, however, we expect gold prices to grind lower, but the downside risk will be contained by the gradual nature of rate increases.”

The firm also writes that long silver ETPs also saw outflows of USD8.3 million, reversing part of the previous week’s USD14.2 million inflows. The diversified commodity baskets saw USD12.4 million in outflows, following the trend of falling net speculative positioning in commodity futures, it was the third consecutive week of outflows from diversified commodity baskets.

“A stronger US dollar following the Fed’s rate move weighed on the commodity complex while oversupply in oil and fears of weak demand in metals haunt the asset class.” Positions in short sterling/long US dollar ETPs fell by USD7.0 million as investors took profit on the sharp depreciation in Sterling after the UK general election on 8th June.“The outflows remove most of the inflows from the prior week. While no progress has been made in forming a coalition nor strengthening the government’s hand in going into the Brexit negotiations, it appears the bad news is now priced-in. Indeed, with three members of the Bank of England now voting to raise interest rates last week, it appears the UK central bank is also getting more hawkish, which should provide some strength to the currency.”

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Beverly Chandler
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