A report issued Friday by ETF Securities says that record outflows tied to a boost in interest rates, decline in gold prices and related factors led to large outflows from commodity-focused exchange-traded products from March to June.
As a result, assets in commodity focused ETPs dropped $49 billion during the second quarter to hit $127 billion, the lowest level since Q2 2010.
On the upside, the report's authors note, gold ETP outflows–which peaked in April–moderated in May and June. "The moderation may indicate that the worst of the gold ETP selling is now behind us," they stated.
For investors looking for a bright spot, ETF Securities points to platinum, which had $712 million of inflows in the second quarter due to concerns over growing supplies.
"The outlook for most commodity flows and prices will likely turn on perceptions of whether the recent liquidity squeeze and growth scare in China is temporary or the start of a larger trend," explained Michael Langerup, Edith Southammakosane and their colleagues. "Gold and silver will likely remain beholden to views on the Fed's intentions and the direction of real interest rates. On both counts we believe investor reactions have been overdone."
Gold Hit
Gold ETPs had close to $19 billion of net outflows in Q2, the largest quarterly outflows since the first gold ETP was created in 2003.
Gold ETP assets declined by $48.9 billion during the period.
"More than 60% of the fall in gold ETP AUM was driven by gold prices dropping by over a fifth," the report stated, as real interest rates rose, the markets adjusted to expectations of a drop in Fed bond buying and the U.S. dollar strengthened.
Other Metals
ETPs focused on platinum had $712 million of net inflows in Q2. Supplied remained tight, and there were rising concerns about future supplies in South Africa, where labor disputes and power shortages have been a concern.
Palladium saw strong inflows in April and May, which reversed in June when China's growth came into focus
