ETP assets soar

Assets in commodity ETPs rose to an all-time high of $207bn in Quarter 3 2012 on the back of surging demand for gold ETPs.

This came as aggressive moves by the US Fed and the European Central Bank to ease monetary policy increased investor demand for hedges against further currency debasement.

Gold ETP assets rose to a new record of $151bn, an increase of $23bn during the quarter - the largest quarterly rise since Quarter 2 2010. Silver ETPs also saw a large increase in assets, with assets under management in silver ETPs rising $5bn to $20bn.

Broad commodity ETPs saw a rebound in demand as investors started to feel more comfortable with the macro outlook following the ECB’s announced policy support for Spain.
Key Commodity ETP developments in Q3 2012:

•    Commodity ETP assets hit all-time high of $207.4bn by the end of September 2012, a rise of $31bn in Q3.

•    Gold ETP assets rise to record high of $151.4bn, up $22.7bn in 3Q 2012. Gold ETPs saw the largest inflows of any commodity, with net new inflows of $7.7bn, the largest quarterly rise since Q2 2010.

•    Silver ETPs saw the next largest increase in assets, with assets rising to $20.0bn, up $5.1bn in Q3. Net inflows increased $477mn over the period.

•    Diversified broad commodity ETP assets rose to $17.0bn, up $2.7bn on the quarter. Diversified broad ETPs saw the second largest net new inflows after gold, with $1.1bn of new purchases.

•    Platinum ETPs also saw strong demand in Q3, with new inflows of $229mn, bringing total platinum ETP holdings to $2.9bn. Labour strikes in South Africa, which produces 80% of the world’s platinum supply, reduced platinum supply causing a surge in the platinum price and investor demand during the quarter.

•    Industrial metal ETPs benefited from improved investor sentiment during the quarter, with net new inflows of $81mn. Broad diversified industrial metals ETPs saw the largest inflows, with inflows of $116mn. Total assets in industrial ETPs stood at $1.9bn at the end of the quarter.

•    Agriculture ETPs, on the other hand, continued to see outflows, with net sales of $77mn. This is the 5th consecutive quarter of agriculture ETP selling, likely reflecting investors taking profits on the large price increases this year. Total assets in agriculture ETPs now stand at $4.0bn.

•    Energy ETPs saw $627mn of outflows in Q3, primarily due to net selling of oil ETPs as prices rose and investors took profits. Natural gas ETPs saw modest net inflows as investors anticipated price gains on increased demand due to hotter than usual weather across the US this summer. Total assets in energy ETPs now stand at $7.6bn.

Nicholas Brooks, head of research and investment strategy at ETF Securities said: “The rise in commodity ETP assets to a new record in Q3 2012 was primarily driven by strong investor demand for gold and silver ETPs to hedge against currency debasement as the world’s major central banks made clear their intention to extend current asset purchase programmes.

“Broad commodity and industrial metal ETPs also saw a pick-up in demand as central bank policies and improved US data helped boost interest in more cyclical assets. Agriculture and oil ETPs saw outflows as investors sold following strong price increases.

“As we move into the fourth quarter demand for gold ETPs has continued unabated as investors anticipate further central bank easing through the rest of the year and into 2013. The demand for broad commodity and industrial metal ETPs will depend very much on whether the recent improvement in sentiment towards Europe and US macro data proves to be sustainable or not.”