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Physical Gold ETPs See Largest Inflows in 17 Months
- Physical Gold ETPs See Largest Inflows in 17 Months. Bargain hunting continues to attract investors to wheat
- ETFS Corn (CORN) saw highest inflows since March 2014
- Long natural gas ETPs received US$5.8mn last week, marking the strongest monthly flows since November 2013
- Investors took profit on ETFS Daily Leveraged Coffee (LCFE), redeeming US$4.2mn, after prices rallied 9.4% in a week
Investors bought ETFS Physical gold ETPs at the highest pace in 17 months as geopolitical risks continued to rise and Argentina approached sovereign default again. The European Union and US have increased sanctions on the Russian economy reflecting the growing animosity between the world’s super-powers. That has led to growing demand for haven assets. Standard and Poor’s, the rating agency, declared Argentina in default after it had missed a deadline for paying interest on $13 billion of restructured bonds, which my lead to further demand for defensive assets. The US posted a strong economic recovery in Q2 2014, growing 4.0% year-on-year after the weather disrupted Q1 2014 growth. Stronger US growth combined with a rebound in Chinese data and more decisive monetary stimulus in the euro area should continue to be supportive of commodity prices – metals in particular – in the coming months.
Physical gold ETPs saw their highest inflows since March 2013
After such a long stretch of equity market outperformance, many investors appear to be protecting themselves against rising geopolitical risk by adding perceived defensive assets such as gold to their portfolios. Last week when the gold price fell 0.6%, investors used the opportunity to add to allocations, with US$106.4mn flowing into physical gold ETPs (US$109.6mn into all long gold ETPs).
Bargain hunting continues to attract investors to wheat. ETFS Wheat (WEAT) and ETFS Leveraged Wheat (LWEA) respectively received their 11th and 12th consecutive week of inflows. Wheat prices fell to their lowest level since 2009 about two weeks ago. Since then, a modest uptick in prices has continued to drive flows in wheat ETPs. The USDA’s crop progress report shows that the harvest is progressing well in the US, but there have been relatively few upside production forecast changes in recent weeks, adding to price stability. WEAT received US$4.7mn of inflows while LWEA received US$2.8mn last week.
ETFS Corn (CORN) saw highest inflows since March 2014
With prices having fallen to their lowest since 2010, inflows into CORN increased to US$3.7mn, marking three consecutive weeks of inflows. While the USDA crop report indicates continued improvement to yield and excellent progress in crop development, many investors feel that prices are now closer to a trough.
Long natural gas ETPs received US$5.8mn last week, marking the strongest monthly flows since November 2013. As prices slipped 0.2% last week (13.8% over the month), investors built positions. Although natural gas usage in electricity production usually increases in the summer months due to higher demand for air conditioning, relatively mild weather in many states has led to lower demand for natural gas this season compared to normal. However, abrupt weather changes could reverse this trend and with gas storage levels significantly below normal, many investors are positioned for a snap-back in prices.
Investors took profit on ETFS Daily Leveraged Coffee (LCFE), redeeming US$4.2mn, after prices rallied 9.4% in a week. Reports of colder and rainier weather in Brazil, which produces 45% of the world’s Arabica coffee crop led to strong price gains. Excess rain has the potential to stall the harvest which is underway and the cold could lead to frost damage. However the forecast is for drier and warmer weather now, prompting the profit taking.
Key events to watch this week
Policy meetings at the Reserve Bank of Australia and Bank of England will likely be the focal point of market attention, while the evolving conflicts in Ukraine and Gaza and the debt crisis in Argentina will also captivate the investor interest.
Important Information
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.
2024 was a landmark year for bitcoin, solidifying its role as a fully institutionalised asset class.
Institutional inflows into physical bitcoin exchange-traded products (ETPs) reached nearly $35 billion globally, signalling a major shift in how traditional investors view crypto. As bitcoin continued to enhance portfolios’ risk-return profiles, more institutional investors followed suit, reshaping the financial landscape.
Looking ahead, 2025 promises to bring exciting developments across the crypto ecosystem. Here are the top five crypto trends to watch.
Fear of being left behind
The era of bitcoin as a niche investment is over. Institutional adoption is creating a ripple effect, forcing hesitant players to reconsider. Portfolios with bitcoin allocations are consistently outperforming those without, highlighting its growing importance.
Figure 1: Bitcoin in a multi-asset portfolio
| 60/40 Global Portfolio | 1% Bitcoin Portfolio | 3% Bitcoin Portfolio | 5% Bitcoin Portfolio | 10% Bitcoin Portfolio | MSCI AC World | Bloomberg Multiverse | Bitcoin | |
| Annualised Return | 5.77% | 6.46% | 7.83% | 9.20% | 12.57% | 9.07% | 0.56% | 56.24% |
| Volatility | 8.79% | 8.86% | 9.14% | 9.62% | 11.42% | 13.94% | 5.05% | 67.28% |
| Sharpe Ratio | 0.48 | 0.55 | 0.68 | 0.79 | 0.96 | 0.54 | -0.20 | 0.81 |
| Information Ratio | 1.01 | 1.01 | 1.01 | 1.00 | ||||
| Beta | 70% | 71% | 73% | 75% | 81% | 100% | 24% | 181% |
Source: Bloomberg, WisdomTree. From 31 December 2013 to 30 November 2024. In USD. Based on daily returns. The 60/40 Global Portfolio is composed of 60% MSCI All Country World and 40% Bloomberg Multiverse. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment may go down in value.
With bitcoin’s ability to noticeably improve portfolios’ risk-return profiles, asset managers face a clear choice: integrate bitcoin into multi-asset portfolios or risk falling behind in a rapidly evolving financial landscape. In 2025, expect the competition to heat up as clients demand exposure to this powerhouse cryptocurrency.
Expanding crypto investment options
In 2024, regulatory breakthroughs opened the doors for physical bitcoin and ether ETPs in key developed markets. This marked a critical step towards making cryptocurrencies mainstream, providing seamless access to institutional and retail investors alike.
Figure 2: Global physical crypto ETP assets under management (AUM) and 2024 net flows
Source: Bloomberg, WisdomTree. 02 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
In 2025, this momentum is expected to accelerate as the crypto regulatory environment becomes more friendly in the United States and as key developed markets follow Europe’s lead and approve ETPs for altcoins such as Solana and XRP. With their clear utility and growing adoption, these altcoins are strong candidates for institutional investment vehicles.
This next wave of altcoin ETPs will expand the diversity of crypto investment opportunities and further integrate cryptocurrencies into the global financial system.
The maturing of Ethereum’s layer-2 ecosystem
Ethereum’s role as the backbone of decentralised finance (DeFi), non-fungible tokens (NFTs), and Web3 is unmatched, but its scalability challenges remain a hurdle. Layer-2 solutions—technologies such as Arbitrum and Optimism—are transforming Ethereum’s scalability and usability by enabling faster, cheaper transactions.
In 2025, Ethereum’s recent upgrades, such as Proto-Danksharding (introduced in the ‘Dencun’ upgrade), will drive layer-2 adoption even further. Innovations like Visa’s layer-2 payment platform leveraging Ethereum for instant cross-border transactions will underscore the platform’s evolution.
Expect Ethereum’s layer-2 ecosystem to power real-world use cases ranging from tokenized assets to decentralised gaming, positioning it as the infrastructure of a truly scalable digital economy.
Stablecoins: bridging finance and blockchain
Stablecoins are becoming indispensable to the global financial system, offering the stability of traditional assets with the efficiency of blockchain. Platforms such as Ethereum dominate the stablecoin landscape, hosting stablecoin giants Tether (USDT) and USD Coin (USDC), which facilitate billions in daily transactions.
Figure 3: Key stablecoin chains
Source: Artemis Terminal, WisdomTree. 05 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
As we move into 2025, stablecoins will increasingly interact with blockchain ecosystems such as Solana and XRP. Solana’s high-speed, low-cost infrastructure makes it ideal for stablecoin payments and remittances, while XRP Ledger’s focus on cross-border efficiency positions it as a leader in global settlements. With institutional adoption rising and DeFi applications booming, stablecoins will serve as the backbone of a seamless, interconnected financial ecosystem.
Tokenization: redefining ownership and revolutionising finance
Tokenization is set to redefine how we think about ownership and value. By converting tangible assets like real estate, commodities, stocks, and art into digital tokens, tokenization breaks down barriers to entry and creates unprecedented liquidity.
In 2025, tokenization will expand dramatically, empowering investors to own fractions of high-value assets. Platforms such as Paxos Gold and AspenCoin are already showcasing how tokenization can revolutionize markets for gold and luxury real estate. The integration of tokenized assets into DeFi will unlock new financial opportunities, such as using tokenized real estate as collateral for loans. As tokenization matures, it will transform industries ranging from private equity to venture capital, creating a more inclusive and efficient financial system.
For the avoidance of any doubt, tokenization complements crypto by expanding the use cases of blockchain to include real-world applications.
Looking ahead
2025 is set to be a defining year for crypto, as innovation, regulation, and adoption converge. Whether it is bitcoin cementing its position as a portfolio staple, Ethereum scaling for mainstream use, or tokenization unlocking liquidity in untapped markets, the crypto ecosystem is poised for explosive growth. For investors and institutions alike, the opportunities have never been clearer or more compelling.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
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