Agricultural ETPs dominated inflows last week says ETF Securities

In its weekly note, ETF Securities reports that agricultural basket ETPs received the largest inflows on the platform, last week, totalling USD46.4 million.

With the exception of cotton, all agricultural commodities have posted price declines over the past year, the firm writes. According to the USDA January World Agricultural Supply and Demand (WASDE) report, updates show most agricultural commodities to be in a surplus. Although net positioning in the futures market for most agricultural commodities has improved over the past month, the majority have been net short over the same period, if not longer.

The bearish sentiment on those agricultural commodities is in contrast to the ETP space but could continue because of ample supply expected in those markets.

Gold was the only precious metal that received inflows. The continued weakness in the US dollar amid a government shutdown in the US has helped the gold price attain a four and a half month high. So far, the parties in the US Congress have agreed to an initial deferment until 8 February, leaving them with enough funds to operate for the next two weeks.

However, this raises further uncertainty and is likely to support further upside for gold prices. Furthermore, rumours that China may curb its purchases of US Treasuries has lent a hand in gold’s upside. The fact that US treasury yields continue to rise and the trade weighted dollar index has fallen to a three-year low suggest that market participants have not yet discounted the rumours.

Crude oil ETPs experienced the twenty-third consecutive week of outflows, totalling USD79.8 million last week says ETF Securities. Oil prices have received a tail-wind from falling crude oil inventories in the US, increased geopolitical tensions (in particular in Iran) and strong compliance by OPEC countries with their deal to curb production. “However, looking beyond the headlines, we see that gasoline inventories have risen (indicating that inventories have simply shifted from crude to product). Geopolitical issues tend to wax and wane and so we doubt that the geopolitical premium will be persistent. US production of oil is likely to rise to an all-time high in 2018, another factor that presents a downside risk for crude.”

Copper price lags the industrial metal sector but received the biggest inflows, the firm writes. Copper ETPs received USD24.5 million last week, with investors buoyant on the industrial metals sector after the IMF has upgraded its growth forecast for China in 2018 and 2019. Copper prices have been a relative laggard of the sector. Although Chinese growth was raised 0.1 per cent to 6.6 per cent in 2018 and 2019 by the IMF, copper stocks in the country rose, contributing to a global inventory rise of 0.6 per cent in 2017, according to the International Copper Study Group.

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