ETF Securities Weekly Flows Analysis: Gold ETPs outflows after hawkish September FOMC minutes

Gold ETPs outflows after hawkish September FOMC minutes…

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Investors continue to sell short GBP and buy long GBP ETCs as GBP seems to be making a floor.

Platinum ETPs recorded the largest inflows of US$22.8mn last week, as investors see price opportunity relative to Gold.

Investors increased their short positions on UK and German stocks

Gold ETPs see outflows after three consecutive week of inflows, as the September FOMC minutes suggested rate hike was a close call. Gold ETPs recorded US$32.8mn withdrawn last week after 3 weeks of inflows, signalling that investors see increased prospects for higher US interest rates. Gold dipped below US$1,250 per troy ounce on Wednesday following the release of the FOMC minutes and under pressure from the strengthening of the US dollar. The minutes revealed several members said it would be appropriate to raise rates “relatively soon”. Following the minutes’ release, investors continued to see about 66% chance of a rate increase in December, based on prices in federal funds futures contracts. Typically, in the run up to a rate hike, gold prices remain weak although we believe the continued pursuance of a negative real interest rate by the US Federal Reserve coupled with political instability throughout 2017 is likely to be supportive for gold in the longer term.

Platinum recorded the largest inflows of US$22.8mn last week, suggesting the recent price weakness has been a buying opportunity for investors. Platinum fell for a third consecutive week entering a technical bear market last Friday amid prospects for higher U.S. interest rates and speculation according to Bloomberg that demand will slip for the metal used in auto pollution-control devices. We believe that very robust car sales figures reported for the US, the EU and China in the last two weeks coupled with increasingly tight emissions standards are likely to provide support in the longer term. Furthermore, platinum trades below marginal cost and has been in supply deficit for the last 4 years.

Short positioning on UK equity ETPs increased by US$7.2mn, as UK stocks fell for two weeks in a row. Investors continue to increase their short positions in ETPs tracking short UK FTSE 100, in the wake of renewed fears of “hard” Brexit’s negotiations. Year-to-date, we saw US$65.5mn inflows to ETPs tracking short UK equity exposure. In the meantime, investors increased their exposure to global equity ETPs led by thematic ETPs related to robotics (US$8.5mn).

Investors continued to cut short GBP positions by US$14.1mn against the Euro as Sterling appears to have reached rock bottom. Currency ETCs tracking short GBP exposures recorded increasing outflows in the past two weeks. Meanwhile investors have increased their Long GBP positions by US$22.4mn.

Key events to watch this week. The US presidential candidates Hillary Clinton and Donald Trump hold their final debate in Las Vegas, exactly two weeks away from election day. In Europe, the European Central Bank meets next Thursday to review monetary policy and stimulus programs. China will report on 3Q GDP as investors wait to see whether the economy has stabilized.



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