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Precious Metals and Cyclicals Continue to Diverge
Commodity ETP Weekly Precious Metals and Cyclicals Continue to Diverge
- Weekly oil ETP inflows highest in four years
- Silver, often regarded as a leveraged play on gold was a key beneficiary of the SNB’s shock moves on Thursday.
- Flows into long copper ETPs rose to the highest level in 4 weeks after a price capitulation drove bargain hunters to the red metal.
Flows into Oil ETPs continued at the highest rate in four years. As the price of Brent and WTI oil benchmarks fell a further 6.5% and 5.2% respectively as more investors were drawn to bargains. Precious metals traded higher as the Swiss National Bank shocked the market with a surprise move to abandon the Swiss Franc’s cap against the Euro. Gold played true to its reputation as a hedge against the unexpected, gaining 3.6% over the week. With the World Bank lowering its GDP growth forecasts for 2015, industrial metal prices fell across the board as concerns over demand dragged down their performance. Lower input costs, with falling energy prices, have helped pull down the price of industrial metals.
Weekly oil ETP inflows highest in four years. Long Brent oil ETPs received US$103.4mn of inflows last week, the highest since March 2011, while Long WTI oil ETPs gained US$147.5mn of inflows, the highest since May 2010. Last week saw the 16th and fifth consecutive week of inflows into WTI and Brent ETPs respectively highlighting that investors are undeterred by continued falling prices. On Friday the IEA cut its non-OPEC supply growth for 2015 on the back of the price fall, and claimed that it will “raise the call” on OPEC to trim production in the second half of 2015 to an average of 29.8 mb/d, just under the official target of 30 mb/d. Oil prices reacted positively to these forecasts at the end of the week. The spread between Brent and WTI narrowed last week with WTI temporarily trading higher than Brent driven by the speed at which both supply and demand are likely to respond more quickly in the US than elsewhere. We, like the IEA believe that non-OPEC production cuts will be the necessary catalyst for OPEC cuts in the latter half of 2015.
Silver, often regarded as a leveraged play on gold was a key beneficiary of the SNB’s shock moves on Thursday. Silver prices gained 4.6% over the week. Inflows of US$114.9mn into ETF Physical Silver (PHAG) were at their highest since February 2014. Most of those flows came before Thursday’s currency turmoil. The gold to silver price ratio had risen to a multiyear high at the end of 2014, highlighting silver’s relative attractive price as an insurance asset. Interest in hedge-assets has recently increased with the VIX and IVSTOXX showing a marked increase. With Greece going to the polls on Sunday, the market is bracing itself for further discourse in Europe.
Flows into long copper ETPs rose to the highest level in 4 weeks after a price capitulation drove bargain hunters to the red metal. While there were multiple reasons for the 8% decline in copper prices last week including the bearish World Bank growth forecasts and selling by Chinese funds at illiquid times of the day, there was only US$0.5mn of inflows into ETFS Daily Short Copper (SCOP) whereas US$4.8mn flowed into long copper ETPs. Some investors believe we are closer to the bottom in copper prices with demand weakness fully priced-in and the potential for another year of supply deficits ahead. Although the International Copper Study Group has forecast supply surpluses at the beginning of the past two years, we have ended the year in deficit. We could have a déjà vu moment again in 2015.
Key events to watch this week. China’s GDP figures will be closely watched to assess the strength of demand from the world’s largest consumer of commodities. The European Central Bank is widely expected to announce full-blown quantitative easing this week after years of resisting following the US on this path. Discussion of the modalities of the programme will no doubt drive asset price rallies – the direction dependent on how inclusive or restrictive the programme will be.
Video Presentation
Nitesh Shah, Research Analyst at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.
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.
Since U.S. President Donald Trump announced tariffs on April 2, termed ”Liberation Day,” global markets have experienced significant volatility. The S&P 500 shed $5.83 trillion in market value over just four days, marking its steepest drop since the 1950s. Asian markets saw their worst session since 2008, reflecting widespread fears of an economic slowdown.
The U.S. 10-year Treasury yields initially fell below 4% as investors sought safety, but by April 8-9, they surged to a seven-week high of 4.515%. This spike, driven by bond market sell-offs potentially from basis trading or China’s strategic moves to pressure U.S. negotiations, suggests a precarious economic situation rather than risk-on sentiment.
On April 9, President Trump announced a 90-day pause on tariffs for most countries (excluding China, where tariffs jumped to 145%) in an effort to give markets time to absorb the changes and calm volatility. The move sparked a broad rally, with the S&P 500 surging 9.5% for its best day since 2008 and Bitcoin rebounding above $80,000 after a turbulent stretch.
Bitcoin is macro now
Despite persistent concerns about crypto volatility, Bitcoin’s price over the past two weeks has closely mirrored the S&P 500 and has actually been less volatile. This alignment reflects Bitcoin’s growing maturity as an asset class and highlights its resilience. As a highly liquid and accessible asset, it continues to attract investors looking for relative value in turbulent markets.
Sentiment shifts toward crypto ETFs
Spot Bitcoin ETFs recorded $700 million in outflows, while Ethereum ETFs lost $400 million since March, marking a sharp reversal after nine consecutive months of inflows. The pullback points to growing institutional caution amid broader macro uncertainty. Still, on-chain data reveals that long-term holders have been steadily accumulating since January lows, signaling continued confidence in the asset class.
Macroeconomic uncertainty takes center stage
The latest U.S. CPI print came in at 2.4%, which was lower than expected. A rate cut in May still seems premature as markets assess the full impact of new protectionist measures. Federal Reserve Chair Jerome Powell has warned that tariffs could raise inflation while slowing growth. As a result, the probability of three rate cuts in 2025 now exceeds 60%. Declining yields may be an early signal of future monetary easing, which could favor risk assets like crypto if economic pressures intensify.
Bitcoin: Dollar’s ally or alternative?
In the face of policy uncertainty, the debate around the U.S. dollar’s reserve currency status is gaining momentum. With its decentralized and censorship-resistant design, Bitcoin is emerging as both a potential complement and challenger to the dollar, especially as the U.S. increasingly wields its currency as a geopolitical tool through tariffs and sanctions.
Meanwhile, Bitcoin’s fundamentals remain solid. Hashrate is at all-time highs, regulatory clarity is improving, and long-term holders continue to accumulate. With prices consolidating above $80K, the current correction may offer a strategic opportunity for investors positioning for the next leg of growth, particularly as the macro picture evolves.
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
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