Commodity ETPs are products that allow investors to ‘bet’ on the price of commodities such as gold. With real interest rates rising and expectations of an early end to quantitative easing (QE) in the US, there was a record decline in ETP commodity assets under management between April and June 2013. ETP assets dropped by $49 billion to $127 billion, the lowest level since 2010 according to data produced by ETF Securities.
Platinum was the real star of the show during the period with $712 million of net inflows, as markets began to price in concerns over the stability of supply lines from South Africa, where labour disputes and potential power shortages have been a feature of the landscape in recent times. Platinum’s best known everyday use is in catalytic convertors.
Nicholas Brooks, head of research and investment strategy at ETF Securities said the he felt the investor sell-off in reaction to recent comments from the Federal Reserve and to sluggish economic data from China was ‘overdone’.
The well documented decline in the gold price continued throughout the quarter. Gold ETPs declined by £185 billion in the second quarter, the largest quarterly outflow since the products were created a decade ago. But there were signs that a recovery may be imminent as the rate of outflows slowed in June. Brooks said that he believes ‘the worst is behind us’ regarding gold.