Investors reveal outlook for gold as trading in precious metal ETCs surges

Apr 24th, 2013 | By | Category: Commodities

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Clients of Barclays Stockbrokers, a leading UK-based execution broker, have revealed their outlook for the value of gold over the next six months, and the research finds expectations of a recovery are mixed.

Investors reveal outlook for gold as trading in precious metal ETCs surges

Expectations of a recovery for gold are mixed.

Following recent price volatility, which saw gold slump to its lowest level in two years, the broker asked clients for their views on how they expect the precious metal to perform over the next six months.

They found that just under a third of respondents (31%) think its value will bounce back over $1,500/oz. However, the majority of investors polled (41%) believe it will remain at current levels (between $1,300/oz- $1,500/oz) while just over a quarter (28%) expect it to drop further, to below $1,300/oz in the next six months.

Globally, asset flows appear to suggest that investors are more bearish on the metal, with long gold-related exchange-traded products (ETPs) experiencing significant redemptions since the dramatic price fall on Monday 15th April. According to data from financial information provider Markit, gold ETPs have seen outflows of some $3.4 billion since last Monday’s fall, with cumulative outflows for 2013 now totalling more than $16 billion. Meanwhile, short ETPs, such as the ProShares UltraShort Gold ETF (GLL), have increased in popularity, with inflows of around $51 million so far this year.

Data released by Barclays also showed how its clients reacted to the plummet in the value of gold. Three of the top five traded exchange-traded commodities (ETCs) had a gold focus for the week commencing 15th April, including the ETFS Physical Gold ($) (PHAU) and ETFS Physical Gold (£) (PHGP) in first and second place respectively, and the iShares Physical Gold ETC (SGLN) in fifth spot. Copper-based ETCs, which often command some of the highest trading volumes, were absent from the top five despite a flurry of key economic data.

Paul Inkster, Head of Product at Barclays Stockbrokers, said: “Following the recent fall in the value of gold to its lowest level in two years, our poll reveals mixed investor outlook for future volatility around the gold price, with 41% of investors expecting the value to remain at current levels across the period of the next six months.”

He added: “We also saw our ETC clients react to the fall in gold value last week, with three of the top five traded ETCs gold-related products. While global economic events will no doubt continue to impact the value of the commodity, and as low inflation drives down demand, there is still a level of optimism for the value of gold as shown in the results of our client research.”

Intriguingly, two silver-related ETCs, both issued by ETF Securities, also featured among the top five. Silver, which tends to exhibit greater volatility than its yellow cousin due to its greater use in industry, has performed even worse than gold and is down around 21% over the past month. As well as tracking gold’s fall, the so-called ‘white’ precious metal has additionally been hit by data showing that China’s economy and manufacturing slowed during the first quarter. China is the world’s second-biggest silver fabricator.

Barclays Stockbrokers Top 5 Traded ETCs – w/c 15 April 2013:

1.      ETFS Physical Gold ($) (PHAU)

2.      ETFS Physical Gold (£) (PHGP)

3.      ETFS Physical Silver ($) (PHAG)

4.      ETFS Daily Leveraged Silver (LSIL)

5.      iShares Physical Gold ETC (SGLN)

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