Global commodity ETP assets rise to record high

Oct 21st, 2011 | By | Category: Commodities

Global commodity exchange-traded product (ETP) assets rose US$3.7bn in Q3 2011 to reach a record quarterly high of US$178.2bn, according to a report from ETF Securities.

Global commodity ETP assets rise to record high

Price gains and new investor inflows pushed gold ETP assets up to a record quarter-end high of US$121.7bn.

The strong headline figure, however, masks highly divergent trends at a sector level, with precious metal ETP assets surging by US$11.8bn during the quarter and all other commodity ETP sectors seeing assets fall by US$8.1bn.

Gold was in fact the only bright spot, with a combination of price gains and new investor inflows pushing gold ETP assets up US$13.7bn to a record quarter-end high of US$121.7bn.

Almost all of the inflows occurred in July, when the combination of the US budget ceiling stand-off, anticipation of Standard & Poor’s removal of the US’s AAA sovereign rating, and deteriorating sovereign conditions in Europe drove gold ETP inflows up US$5.6bn.

Around 70% of these inflows were into US listed ETPs, indicating US investors were particularly shaken by the anticipate US sovereign downgrade and budget stand-off.

Weakening global growth and rising concerns about sovereign debt caused assets in almost all non-precious metal commodity ETPs to fall as investor de-risking drove prices lower and caused a re-direction of investor flows into cash and G3 government bonds. In the year to September, non-precious metal ETPs experienced net outflows of US$5.6bn.

Commenting, Nicholas Brooks, Head of Research and Investment Strategy at ETF Securities, said:

“It has been a turbulent year for commodity ETPs, with rising growth and risk appetite in the first few months of the year driving strong demand for more cyclical commodities, and then the downturn in global growth and falling risk appetite driving these flows out over the summer and through the third quarter.

“The one constant has been strong demand for precious metals ETPs – particularly gold – as investors have sought out the security of physically-backed gold ETPs as a hedge against currency debasement risks and the generalised rise in European sovereign and financial sector default risks.

“With developed economy sovereign risks and the need for low to negative real interest rates likely to remain in place well into 2012, demand for physically-backed precious metals ETPs is likely to remain well supported. As the sovereign debt issues are addressed and global growth regains its footing, broad commodity ETP flows may increase as well.”

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