WisdomTree reports long nickel and aluminium ETPs enjoy highest inflows

Nitesh Shah, Director, Research at WisdomTree writes that, last week, long nickel and aluminium ETPs saw the highest inflows since February 2018 as prices begin to recover.

“Nickel prices rallied 2.5 per cent while aluminium rallied 4.2 per cent last week as the market appears to be shifting focus to the supply disruptions that US protectionism is likely to cause. Long nickel ETPs received USD31.2 million while long aluminium ETPs received USD6.5 million.
“As we pointed out in ‘Trade wars: price optimism ahead for metals?’, the market appears to be wavering between protectionism being positive and protectionism being negative for prices. In the first bout of tariff announcements in February 2018, prices trended down. Then between April and June prices rallied as the supply disruptions came into focus. As the Trump administration rattled its protectionist sabres more intensely, the market had been concerned about the damage to global growth, with prices declining for most of June and July.
“The reopening of several mines in the Philippines in June (following their closure in February 2017 for environmental violations) added further headwinds to the metals’ performance. But, as of last week, the market shifted focus back to supply disruptions despite the intensity of Trump’s threats of trade wars revving up a gear. Copper only managed to gain 0.1 per cent as the strike at Escondida (the world’s largest copper mine) was averted at the last minute as the Chilean government began to act as a mediator between the Union and BHP Billiton. However, if an agreement on the wage contract is not agreed by the 14th August 2018, a strike could be back on the cards.”
Long gold ETPs received the first inflow in six weeks, last week, Shah writes, amounting to USD26 million.
“Although gold prices remained lacklustre, some investors are now coming to believe that the price decline has been overdone. We certainly hold that view. Although the US Dollar is strengthening, US Treasury yields have not risen as much as we had expected back in June and US inflation is running at a six-year high. Overly-subdued investor sentiment for the metal (both in futures and ETP markets) accounts for the poor price performance. If that is now turning a corner, we could see gold prices play catch-up.
“Our estimated base case is for gold to reach USD1307 by June 2019, up 8 per cent from today’s levels. Economic disarray in Turkey, with a sharp Lira depreciation (which had knock-on contagion to the Euro last week), could send investors looking for haven assets. Gold has traditionally played the role of a safe haven asset in many investors portfolios,” Shah writes.
Shah concludes with EUR ETPs, writing that the second week of short USD, long EUR ETP inflows is likely to lead to disappointment.
“Last week there were USD5.9 million inflows into Short USD, long EUR ETPs. The prior week there were USD5.6 million of inflows. In the past week the Euro depreciated close to 2 per cent against the US Dollar as investors feared contagion into the European banking system from exposure to Turkish loans.”

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