Gold ETFs have staged a strong start to the new year, with ETF Securities reporting that its range of gold products received inflows of $19.2 million during the week ending 5 January 2018. Gold prices ended the week 1% higher supported by a weak US dollar.
Aneeka Gupta, Associate Director, Equity & Commodities Strategist, ETF Securities
Commenting on the outlook for gold, Aneeka Gupta, associate director, equity & commodities strategist at ETF Securities, noted: “While the rise in US payrolls missed estimates by a considerable margin of 42,000 workers in December, owing to a shortfall in the services sector, it is unlikely to be a significant shift in the overall trend. The US ADP employment data showed private employers added 250,000 jobs in December, marking the biggest monthly increase since March last year.
“The accomplishment of passing the US tax bill is also likely to benefit US corporate earnings. We continue to expect the Fed to hike in March. Moreover the December FOMC minutes released last week, highlight concerns of higher inflation expectations in 2018 stemming from wage growth. The likelihood of higher inflation should keep the Fed on track with its three rate hike projections in 2018 and is likely to be a headwind for gold prices going forward.”
ETF Securities’ blockbuster gold product is the ETFS Physical Gold (PHAU LN) which has $6.3 billion in assets under management (AUM).
ETF Securities reported that its precious metal ETFs also saw increased demand over the week, gathering inflows worth $18.8m.
Palladium continued to impress, rising above $1,100 for the first time in 17 years as fears of a supply shortage continue to drive prices higher. Gupta believes, however, that better value may be found elsewhere within platinum-group metals (PGM). She notes, “We expect to see its closely traded counterpart platinum outperform, owing to its steep price discount and the strengthening European car market.”
ETF Securities’ PGM products include the ETFS Physical Palladium (PHPD LN) and ETFS Physical Platinum (PHPT LN).
Turning to the energy market, Brent crude prices rose above $68, its highest level since May 2015, which ETF Securities attributes to fears of political unrest in Iran disrupting oil supply coupled with OPEC’s high compliance with production cuts. Meanwhile, positive economic data across the globe and severe cold weather conditions in the US sent WTI crude oil just shy of its 2015 high.
Despite the bullish markets, the firm’s crude oil ETFs saw outflows of $14.1m, extending last year’s trend of relentless outflows. Gupta noted, “Evident from the build-up in short positioning of crude oil ETFs, investors are increasingly becoming aware that current prices are unsustainable as the US continues to expand production and the unrest in Iran settles.”
Elsewhere, the firm’s range of diversified commodity basket ETFs received $12m as many major commodities kick-started the year with strong performance on the back of an improving global growth story. The Bloomberg Commodity Index – one of the most well-known benchmarks for the performance of the broader commodity market, and the underlying index of the ETFS All Commodities (AIGC LN) – attained its highest level since 2014.
The index is well diversified and contains components in the energy, grains, industrial metals, precious metals, softs and livestock sectors. Commodities are weighted two-thirds by liquidity and one-third by global production with caps (max 15%) and floors (min 2%) to the exposure of any one commodity in the index, resulting in a more balanced index weighting.
AIGC has AUM of $387m and charges management fees of 0.49%.