The Ukrainian crisis remained in focus last week, with the European Union joining the US in imposing sanctions against Russia. Fears of a deterioration of the situation in the Ukraine drove inflows into gold ETPs last week, despite ….
ETF Securities Research
more hawkish than expected comments from new Fed Chair Janet Yellen. While fears of a slowdown in China continued to weigh on industrial metals last week, cotton attracted tactical allocations by investors.
Long gold ETPs continue to see inflows on fears of a deterioration of the situation in the Ukraine. The EU joined the US in imposing sanctions against Russia last week, in an attempt to prevent the crisis turning into a war. We believe the current global environment will remain supportive of defensive assets, despite the correction in the gold price following the more hawkish than expected comments by new Fed Chair Yellen last week. Long silver ETPs also benefited, with US$5.6mn of inflows, as investors looked to add defensive positions with its correlation to gold holding strong. At the same time, palladium ETPs registered US$9.5mn of outflows as the price hit the highest level since August 2011.
Divergent views drive outflows from both long and short natural gas ETPs. The Henry Hub natural gas price has traded a wide and choppy range over the past month, falling from US$6.15/MMBtu to US$4.38/MMBtu recently. With the low season for natural gas demand starting in March, we believe the decline in natural gas price will potentially reach US$3/MMBtu by the end of May. At the same time, investors are becoming less pessimistic about WTI with short ETPs seeing US$2.1mn of outflows. We expect the WTI-Brent crude spread to continue narrowing as the upcoming US driving season boosts US oil demand, in turn lifting the WTI price while a reduction in the geopolitical risk premium puts downward pressure on Brent.
Profit taking prompts US$3.4mn out of ETFS Nickel (NICK). The nickel price has jumped over 10% in the past month and supply constraints in Indonesia and potentially Russia are likely to continue to support prices in the near-term.
Long Arabica coffee ETPs see another week of outflows as improving weather conditions in Brazil forces price lower. Rainfall is expected over the next few days in Brazil’s top producing state and it is likely to improve crop conditions. Earlier in the year, the price of Arabica coffee jumped to a 2-year high on drought conditions in Minas Gerais, Brazil, where the rainfall deficit in Jan/Feb was the worst since at least 1950. Since then, prices have plummeted 15% as rain has resumed in key growing areas. With weather conditions changing and the potential for an El-Nino weather event to boost supply in coming months, we expect prices to decline back to recent support levels around 1.55 per pound.
ETFS Cotton (COTN) receives US$5.7mn of inflows, the largest since September 2009, on strong US exports. Cotton price has risen almost 7% over the past month, reaching a 7-month high at the beginning of last week. The USDA recently revised downward its forecast for US stock levels for the 2013/2014 season on elevated US exports. At the same time, investors took profit on long wheat ETPs last week, as the price hit an 11-month high on the Russian/Ukraine crisis.
Key events to watch this week. US Markit manufacturing PMI, retail sales and Q4 GDP data will also be watched closely to gauge the strength of the US recovery and the pace of Fed tapering.
Divergent views drive outflows from both long and short natural gas ETPs. The Henry Hub natural gas price has traded a wide and choppy range over the past month, falling from US$6.15/MMBtu to US$4.38/MMBtu recently. With the low season for natural gas demand starting in March, we believe the decline in natural gas price will potentially reach US$3/MMBtu by the end of May. At the same time, investors are becoming less pessimistic about WTI with short ETPs seeing US$2.1mn of outflows. We expect the WTI-Brent crude spread to continue narrowing as the upcoming US driving season boosts US oil demand, in turn lifting the WTI price while a reduction in the geopolitical risk premium puts downward pressure on Brent.
Profit taking prompts US$3.4mn out of ETFS Nickel (NICK). The nickel price has jumped over 10% in the past month and supply constraints in Indonesia and potentially Russia are likely to continue to support prices in the near-term.
Long Arabica coffee ETPs see another week of outflows as improving weather conditions in Brazil forces price lower. Rainfall is expected over the next few days in Brazil’s top producing state and it is likely to improve crop conditions. Earlier in the year, the price of Arabica coffee jumped to a 2-year high on drought conditions in Minas Gerais, Brazil, where the rainfall deficit in Jan/Feb was the worst since at least 1950. Since then, prices have plummeted 15% as rain has resumed in key growing areas. With weather conditions changing and the potential for an El-Nino weather event to boost supply in coming months, we expect prices to decline back to recent support levels around 1.55 per pound.
ETFS Cotton (COTN) receives US$5.7mn of inflows, the largest since September 2009, on strong US exports. Cotton price has risen almost 7% over the past month, reaching a 7-month high at the beginning of last week. The USDA recently revised downward its forecast for US stock levels for the 2013/2014 season on elevated US exports. At the same time, investors took profit on long wheat ETPs last week, as the price hit an 11-month high on the Russian/Ukraine crisis.
Key events to watch this week. US Markit manufacturing PMI, retail sales and Q4 GDP data will also be watched closely to gauge the strength of the US recovery and the pace of Fed tapering.
