ETF Securities writes that gold saw its third consecutive week of outflows last week

Aneeka Gupta, associate director, equity and commodities research with ETF Securities by WisdomTree, has reviewed last week’s ETF flows and writes that gold can’t seem to find a floor.

Gold ETP outflows surged last week by USD119.7 million, marking the third consecutive week of outflows as gold prices shed 0.81 per cent last week, declining to USD1231.1.
 
“We believe the testimony of Fed Chair Powell before the US Senate had a strong role to play in gold’s weak price performance last week. As his optimistic outlook on the US economy cemented the Federal Reserve’s (Fed) rate hike trajectory for the rest of 2018 supporting the US dollar higher. Since the start 2018, the stronger US dollar (up 3.17 per cent) amidst the rising rate environment in the US, has underpinned the weakness of gold prices (down 6.62 per cent).”
 
Gupta writes that last week, Larry Kudlow the US president’s economic adviser, blamed the Chinese President Xi Jinping for stalling of trade dispute talks between the two nations.
 
“The Chinese Ministry of Foreign Affairs retaliated aggressively, by announcing that although it did not want a trade war, it was not afraid of one either. In the absence of any productive negotiation, the international trade wars seem to be intensifying and if this trend were to continue we expect inflation to accelerate at the cost of decelerating economic activity, which should favour gold. According to Commodity Futures Trading Commission (CFTC), net speculative positioning on gold futures are currently 1x standard deviation (as on 13 July 2018) below their 5-year average, highlighting the extent of the negative sentiment towards the yellow metal.  We expect, gold prices to stage a recovery over the second half of this year.”
 
Turning to copper, Gupta notes that strong copper fundamentals appear to defy trade war threats as copper ETP inflows worth USD26.5 million rose to their highest level in 14 weeks.
 
“Last week, Chinese economic growth slowed fractionally to 6.7 per cent year-on-year compared to 6.8 per cent last year. However monthly data reported by the National Bureau of Statistics (NBS) was mixed with industrial production and investment slowing but retail sales and house price growth higher. As a historically well-regarded barometer of world economic health, copper prices have been caught in the cross hairs of trade wars and slowing momentum from Chinese growth evident from the price slide over the past 6 consecutive weeks to USD6122.5 (as on 20 July 2018).
 
“However optimism over the red metals’ strong fundamentals helped overcome the negative sentiment emanating from the trade wars as inflows into copper ETPs rose over the past two weeks. Failing collective wage negotiations at BHP’s Escondida mine, the world’s largest copper mine, highlight the risks to copper’s current supply levels.  Discussions are set to continue as the current collective agreement expires at the end of the month. As both sides have stated their desire to reach an agreement, a strike is a less likely however prices are likely to remain on tender hooks until we reach an agreement.”
 
Gupta writes that nickel ETP inflows garnered momentum for the fourth week in a row as bargain hunters chase falling prices. 
 
“Nickel prices suffered a sharp decline -3.18 per cent last week with prices nearing a three-month low on the back of news that the Chinese government is considering reducing incentives for buying electric cars from next year.”   

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