Market Research

Gas, Silver Boosted As Economic Recovery Gains Pace

Sandra Kilhof Reporter London 7 August 2013

Gas, Silver Boosted As Economic Recovery Gains Pace

Cyclical commodity prices went up in the previous week, following signs that the global economic recovery is gathering momentum, according to a report from UK-based ETF Securities.

Purchasing manager indices indicate that the manufacturing sector is expanding in the US, China and Europe, boosting industrial metal and energy prices, it said. 

For instance, silver ETPs enjoyed the highest inflows since the April price crash, where prices dropped more than 15 per cent. Now, technical indicators signal a potential upside, as pessimism has gone too far, creating a weekly inflow for silver at $10.7 million. However, other precious metals such as platinum and gold remained negative with massive outflows of $19.7 million and $10.4 million respectively. According to ETF, the falling interest in gold mostly comes down to investors seeing a diminishing tail-risk as the US economy continues to recover.

In this respect, the cyclical upswing was largely based on the US economy surprising investors and industry players, by outstripping estimates with a GDP growth of 1.7 per cent annualised in Q2. Original estimates of the US recovery were far more moderate based on the possible tapering of the US Federal Reserve’s quantitative easing programme, as well as disappointing employment statistics.

The positive news also helped foster interest in energy and industrial metals with longer dated industrial metals attracting $7.7 million, the largest inflow since December 2012. More importantly, natural gas inflows surged as they hit an 18-month high of $23.9 million thanks to investors rallying around energy commodities.

In related news, ETF recently said that the downside in precious metals, particularly gold, will remain limited as recent sharp share price drops, will open up opportunities for investors to begin to accumulate positions - thus indicating that the current outflow of gold is not sustainable in the long term.

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