Investors continue to dump commodity ETPs in May-BlackRock

Tue Jun 11, 2013 10:34am EDT

Related Topics

* Outflows from commodity ETPs total $6.3 bln
    * Investors still shunning gold, broad commodities
    * Weak growth outlook, strong dollar subdue demand

    LONDON, June 11 (Reuters) - A stronger dollar and weaker
inflation expectations prompted further redemptions from
commodity exchange traded products (ETPs) by investors in May,
although the pace slowed from April's record outflows. 
    ETPs, whose value is linked to moves in their underlying
assets, are seen as an easy route into commodities.
    Commodity ETPs lost $6.3 billion last month according to
data from BlackRock, compared with an unprecedented $9.3 billion
in April. This was largely due to a reduction in outflows from
gold ETPs, which totalled $5.7 billion in May, compared with
$8.7 billion in April.
   Dodd Kittsley, global head of ETP research at BlackRock, said
that trend was continuing. 
    "In the first four trading days of June, we have seen $374
million of outflows from global gold ETPs," Kittsley said.
"However, gold continues to face headwinds as investor inflation
expectations continue to ease."     
    A strong U.S. dollar is also weighing on commodities as this
makes commodities priced in dollars more expensive for buyers
using other currencies. In mid-May, the dollar hit its highest
level since July 2010 against a basket of currencies.
    May was the fifth straight month of outflows of over $1
billion from gold ETPs, putting the year-to-date total at $23.9
billion, BlackRock said. Total global assets in gold ETPs shrank
to $96.2 billion, a decrease of 32 percent from the $141.2
billion at end-2012. 
    BlackRock partly attributed the continued outflows to the
weakness in gold spot prices, which are down 17 percent
in the year-to-date and down about 27 percent from the record
high of just over $1,900 per ounce reached in September 2011. 
    It also cited the growing belief that monetary easing from
the U.S. Federal Reserve may end in the near term, which could
herald a rise in interest rates.
    
    TEPID APPETITE
    Investors pulled more money from broad commodity ETPs. Some
$333 million flowed out of the segment in May, the majority
before May 9.
    Investors are showing more appetite for riskier U.S. equity
sectors, but appetite for growth-oriented commodity segments
remains tepid.
    Industrial metals ETPs managed to attract just $28 million
in May, but that was an improvement from outflows of $113
million in April. Energy ETPs suffered outflows of $48 million. 
    Ole Hansen, head of commodity strategy at Saxo Bank, said
that "cyclical" commodities, which rely on growth to spur
demand, were hit after Chinese manufacturing data pointed to
continued weakness. 
    "This once again (stimulated) talk of whether the super
cycle ... which primarily was driven by rising demand from
growth in emerging economies, especially China, was coming to an
end," he said.
    Oil ETPs came under pressure after U.S. inventory levels
rose to near their highest level since 1931. Analysts at S&P
also highlighted weak U.S. consumer spending data and high
eurozone unemployment figures. 
    At the end of May, BlackRock's data covered 926 commodity
ETPs worldwide, worth some $148 billion. The following table
shows global commodities ETPs at end-May (US$mln):  
 SECTOR                            FLOWS       ASSETS
 Broad/Diversified                 -333        17,894
 Agriculture                       45          5,465
 Energy                            -48         7,740
 Industrial Metals                 28          2,306
 Gold                              -5,727      96,208
 Silver                            -281        12,825
 Other Precious Metals             28          5,151
 Total Precious Metals             -5,980      114,184
 TOTAL COMMODITIES                 -6,288      147,589
 Source: BlackRock

 (Reporting by Claire Milhench; Editing by Elaine Hardcastle)
FILED UNDER: