Exchange-traded Commodities Rebound in Europe

Shanny Basar

Source and ETF Securities, independent providers of exchange-traded products in Europe, both had record demand for exchange-traded commodities last month.

Source said in a statement that it had record demand for its Source Physical Gold P-ETC (SGLD) product last month, which attracted $300m to take total assets in the product to more than $2bn. “SGLD was the most actively traded gold exchange-traded commodity in Europe so far this year and saw the largest inflows of any European gold ETC,” added the statement.

In contrast, in the whole of last year SGLD had less than $250m of inflows. Christopher Mellor, who leads the equity product management team at Source, told Markets Media: “Last year investors were relatively optimistic for a recovery but the start of the year has put that to the test.”

Mellor said SGLD has attracted more than $400m this year and the firm’s gold products have gathered inflows of more than $1bn in total. Investors like gold due to the recent market volatility as well as the economic uncertainty. “Equity investors have experienced losses of more than 15% in Europe in the year-to date and so have turned to gold in reaction to this uncertainty and to add diversification to their portfolios,” he added.

He continued that gold is a good diversifier if economic growth stalls or inflation increases. Mellor added that Source’s independent research team was not bearish and does not believe there will be a collapse in economic growth.

“There is more scope for more inflows into gold,” Mellor added. “A lot of investors who bought gold during the financial crisis or just after don’t own as much as they once did and are moving to a more neutral, rather than an underweight, position.”

Rival ETF Securities said in a statement that it had record net inflows of over $1bn since the start of this year including $720m into gold-linked ETPs and more than $320m into oil-linked ETPs. On 9 February ETF Securities had its highest ever one day net inflow of $345m into its gold linked ETPs.

James Butterfill, head of research, at ETF Securities, said in a statement: “We expected an improved performance for gold in 2016 and it’s certainly starting to materialise. Investors are returning to gold as a core diversifier and safe haven investment. Given the increasingly challenging investment and economic environment, we expect this trend to continue.”

A survey released by the CFA Institute today found that almost one-third of investors feel that another financial crisis is likely within the next three years. In addition, only half of all investors believe their investment firms are “very well prepared” or “well prepared” to manage their portfolio through a crisis.

Global commodity ETFs/ETPs accumulated net inflows of $3.4bn last month, with $2bn allocated to gold products – compared to total net inflows of $2.4bn for the whole of 2015 according to consultancy ETFGI.

 The global ETF/ETP industry gathered net inflows of $13.1bn in net new assets in January 2016, according to preliminary data from ETFGI’s January 2016 global industry insights report.

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