After high outflows from gold ETCs in the first half of the year, the trend is now mixed. Gas ETCs, which have long been heavily traded, are attracting less interest in view of stable prices.
27 July 2023. FRANKFURT (Börse Frankfurt). In commodity ETC trading, almost everything revolves around gold ETCs again. Energy ETCs, which have long attracted a great deal of attention, no longer play a major role. The gold price has risen again somewhat in July, currently the fine ounce costs 1,982 U.S. dollars - still a plus of almost 9 percent since the beginning of the year. The as expected interest rate hike in the U.S. yesterday (Wednesday) failed to have a major impact.
"The gold price is benefiting from speculation on an end to Fed rate hikes," explains commodities analyst Barbara Lambrecht of Commerzbank. However, Lambrecht considers setbacks in the coming weeks quite possible. "Incidentally, it is striking that the recent price recovery was not accompanied by ETC inflows either. Thus, there is a lack of support in investment demand for gold."
Gold price: new records in 2024?
However, some expect new highs soon: the U.S. bank JP Morgan, for example, expects the gold price to exceed $2,000 by the end of the year and to rise to $2,175 by the end of 2024 - a new record. Falling real interest rates in the U.S. would be a "significant driver" for the precious metal in the wake of initial interest rate cuts by the Federal Reserve in the second quarter of 2024.
Lang & Schwarz recorded good turnover in gold ETCs in the past four weeks, with purchases and sales, especially of Xetra Gold (DE000A0S9GB0). High turnover on the Frankfurt Stock Exchange currently includes gold ETCs from Invesco (IE00B579F325), Xtrackers (DE000A2T5DZ1), WisdomTree (JE00B1VS3770) and Amundi (FR0013416716), in addition to Xetra Gold. Xetra Gold's holdings remain at a high level, currently 224 metric tons, but are slightly down from 231 metric tons at the end of 2022 and 238 metric tons at the end of 2021.
Oil: "Upward pressure from the supply side".
Meanwhile, things are calmer again for energy commodities: The price of a barrel of Brent North Sea crude has risen slightly, but at currently 82.60 U.S. dollars, it is roughly at the same level as at the beginning of the year. The US$116 reached at its peak in spring 2022 is a long way off, and the lows around US$70 are also a thing of the past. "The upward pressure is currently more likely to come from the supply side," notes commodity analyst Dora Borbély of DekaBank. "Weak prospects for U.S. shale oil production, an announced reduced Russian production and OPEC tightening are having an impact."
Barbara Lambrecht of Commerzbank takes a similar view: "The undersupply in the second half of the year, which was previously only imminent, is now showing up in hard figures." Russia's seaborne oil exports have barely recovered of late, she said. "Supply could become even tighter in August, when Russian oil exports are expected to be curtailed again." In addition, there would be lower drilling activity in the US. The bank therefore expects oil prices to remain high.
Borbely
Cooling off for gas ETCs
The violent price swings for natural gas also seem to have come to an end. The forward contract for Dutch natural gas (Dutch TTF), which is relevant for Europe, is currently at 32.80 euros - below the level before the outbreak of the Ukraine war. Last summer, it briefly exceeded 300 euros/MWh, followed by a decline to 23 euros/MWh in June of this year. Gas ETCs now attract little attention, as Leo Puschmann of Lang & Schwarz notes, such as WisdomTree Natural Gas 3x Daily Leveraged (IE00BLRPRG98) and WisdomTree Natural Gas 3x Daily Short (IE00B76BRD76).
In June, gold ETCs again dominated ETC trading on Xetra. As usual, Xetra Gold was the top trader. Also heavily traded were Invesco Physical Gold (IE00B579F325), Xtrackers IE Physical Gold EUR Hedged (DE000A2T5DZ1) and iShares Physical Gold (IE00B4ND3602). Silver ETCs also saw a lot of turnover, specifically Xtrackers Physical Silver (DE000A1E0HS6) and WisdomTree Physical Silver (JE00B1VS3333). Only in 13th place is the first non-precious metals ETC to be found, namely WisdomTree Natural Gas 3x Daily Leveraged (IE00BLRPRG98).
Base metals: Still in the red
Industrial metals prices have also risen somewhat recently. However, since the beginning of the year - measured by the widely traded WisdomTree Industrial Metals (GB00B15KYG56) - they are still down 14 percent. According to Lambrecht, the latest recovery attempt has failed. "In addition to reports of oversupplied markets, weak demand prospects in China, the most important sales market, are dampening sentiment." Some hope is now pinned on the Chinese government's new stimulus measures, he said. "However, we do not think that these will cause prices to rise noticeably in the short term."
In the first half of the year, trading in commodity ETCs in Europe was dominated by outflows from gold products, as reported by Munich-based ETP analysis and trading house Crossflow. "After the sell-off in gold ETCs had calmed down somewhat in recent months and even a small counter-reaction could be observed, further redemptions followed in June." This resulted in net outflows of 2.7 billion euros since the beginning of the year. In contrast, Crossflow reported inflows for energy (973 million euros), industrial metals ETCs (886 million euros) and, above all, commodity baskets (2.1 billion euros).
by Anna-Maria Borse, 27 July 2023, © Deutsche Börse AG
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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