ETC: Strong Demand for ETFS Physical Gold, Silver and Leveraged ETCs

Flows into ETFS Physical Silver (PHAG) have remained strong, rising by $40mn since mid-August. Safe haven buying appears to be the primary driver of gold and silver demand as investors look for shelter from financial and economic uncertainty. Longer term investors may also be looking for portfolio insurance against the risk of a structurally weaker US dollar and higher inflation as the Fed continues to ease aggressively.

ETFS Leveraged products (which move 2X the daily % change in the underlying commodity) have also received renewed interest recently, particularly precious metals. ETFS Leveraged Gold (LBUL) and ETFS Leveraged Silver (LSIL) added $4 million and $2 million respectively in net inflows last week, bringing year to date net inflows to $50 million and $27 million respectively. ETFS Leveraged Silver (LSIL) has registered a strong uptrend in net creations since mid-2008 despite silver spot price falls, suggesting that some investors may see an opportunity for value investing at current price levels.

ETFS short ETCs have seen increased investor interest, most notably in energy. ETFS Short Crude Oil (SOIL) registered net inflows of $11 million last week, almost one-third of total year to date SOIL AUM. SOIL inflows increased sharply in the first half of the year as investors hedged oil price risk out of their portfolios. The renewed interest in SOIL indicates some investors are anticipating further short-term downward pressure on energy prices.