ETF Securities Weekly Flows Analysis – Gold in favour with real interest rates expected to remain low
- Gold ETPs recorded second largest weekly inflows of the year on rising prices.
- Oil ETPs recorded net inflows for the fourth consecutive week, as prices continue to slide.
- Investors optimistic about the Euro as political uncertainty fades.
- Investor interest in thematic technology ETPs continues to grow.
Gold ETPs recorded the second largest weekly inflows of the year as investors expect Fed dovishness to support prices further. Last week saw inflows of US$167mn into gold ETPs as investors expect further signs of dovishness from the Fed. The gold price rose by 1.45% over the past week and 4% since the Fed’s mid-March rate hike. We believe a dovish Fed will lead to further decline in real interest rates as inflation continues to rise, potentially sending gold price to US$1,300/oz by mid-year.
Investors optimistic about the Euro as political uncertainty fades. While UK Theresa May will trigger Article 50 this week, starting the two year negotiation period to leave the EU, the victory of the conservative party in the Netherlands and French candidate Macron taking the lead in the polls, fading fears of a rise of populism in Europe have supported the Euro. As a result, last week saw inflows of US$9.2mn in short USD long EUR ETPs. Investors also reduced exposure to the Japanese Yen, adding US$8.7mn into long USD short JPY ETP.
Oil ETPs recorded net inflows for the fourth consecutive week, as prices continue to slide. Brent and WTI fell by 1.75% on average over the past week, ending the week close to US$50/bbl for Brent while WTI was trading at a discount of around US$2.8/bbl. We believe oil prices will continue to fall as Saudi Arabia’s domestic demand is likely to rise, reducing the probability of more output cuts in the coming months. Meanwhile in the US, rig counts, oil production and inventories continue to increase, exacerbating the oversupply trend and weighing on the price of WTI. Net speculative positions on both futures contracts declined by another 13% on average the week before last, suggesting more downside pressure on oil prices in the near term.
Investor interest in thematic technology ETPs continues to grow. Cybersecurity and robotic ETPs recorded another US$5mn and US$16mn inflows last week, alongside a price rise of 1.42% for cybersecurity but a decline of 1.12% for robotics. With the exception of one week, these ETPs have continuously recorded inflows since their launch, totalling US$142mn and US$401mn of assets respectively. Inflows in cybersecurity and robotic increased by 70% and 103% respectively year to date. Meanwhile, prices have increased by 13.4% and 11.5% respectively over the same period.
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