Highlights of the first week of January 2009

Even the holiday period did not stop investors from continuing to build positions in Gold and oil Exchange Traded Commodities (ETCs).

In the week ending 2 January 2009, investors bought nearly $35 million of physically backed gold ETCs and over $30 million of long oil ETCs, bringing aggregate net inflows to levels 60% and 466% above year-ago levels.

ETFS Physical Gold (PHAU) saw the largest flows of all ETCs, rising by $42mn during week. PHAU has seen $157mn of inflows over the past month and nearly $1.2bn over the past 12 months, making it the most popular ETC over the past year.

Of the oil ETCs, ETFS Brent (OILB) received the most flows last week with an increase of $13mn. ETFS Crude Oil (CRUD) saw nearly $10mn of inflows.

Even ETFS Leveraged Crude Oil (LOIL) - which moves 2 times the daily percent change in the underlying - saw $5mn of inflows last week, the largest of any leveraged ETC.

The turnaround in energy positioning over the past two months has been especially pronounced. Between August and October investors were reducing their holding of long energy ETCs as the oil price fell from a peak near $150/bbl to below $50/bbl.

However, as the oil price dropped below the $40/bbl level, investors have begun to aggressively build long positions.

At the same time, flows into short energy ETCs (particularly ETFS Short Crude Oil), which built rapidly in the April-July 2008 period as the oil price surged, have fallen back sharply. The net result, as shown in attached report, is that net long positions in energy ETCs are now the highest they have ever been.

Overall, net flows into Exchange Traded Commodities (ETCs) have been rising now for 8 consecutive weeks (see link above), indicating that investors are becoming increasingly positive on the outlook for commodity prices - particularly oil and gold.

Research Courtesy: ETF Securities

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