Total outflows into Gold ETPs for the week totalled US$62m highlighting the relief
rally at the beginning of the week leading to Gold outflows. However, after the
shock Brexit vote investors reversed their positions and purchased safe
haven assets with inflows into gold ETPs totalling US$201m for Friday
alone.
The gold price gained 4.2% on Friday to around US$1,316 per troy ounce, after Britain
delivered a shock vote to leave the European Union, sending investors scurrying for
protection in bullion and other assets perceived as lower risk. Other precious metals
such as silver and platinum gained 4.3% and 2.5%, respectively on Friday. Prior to the
vote, precious metals only received a total US$47mn as investors saw the odds for a
Brexit as low. We believe that risk-off sentiment will persist until a clear withdrawal
plan from the European Union is set out.
Long crude oil saw outflows of US$7.1mn. Oil prices settled 5% lower after
Britain’s vote to leave the European Union spurred massive risk aversion. The losses
were much smaller for the week as a whole, with Brent down 1.5%and U.S. crude 0.7%.
Investors paid little heed to data on Friday showing the US oil rig count fell by seven
last week, the first weekly reduction in 4 weeks. We see the Brent fair value of US$55
per barrel at the year-end 2016, reflecting the 75th percentile of the crude production
cost-curve, where supply-demand responses occur.
Last Friday Short GBP ETPs saw about US$180mn after Britain’s vote to
leave the European Union. The British Pound fell 8.05% against US dollar to 1.368
while it fell 5.75% against Euro to 1.232 on Friday. Investors cut short GBP ETP
positions at fastest rate in nearly two years. During the week, investors withdrew
US$25.4mn from short GBP ETPs. Meanwhile, the EU referendum decision also
prompted USD outflows, as the chances for a US rate hike declined. Outflows from
Long US Dollar ETPs totalled US$25.2mn, the largest in 12 months.
Key events to watch this week. Investors will be waiting for the “Leave” campaign
to provide a framework on UK withdrawal from the EU. On the other hand, the debate
over the “Brexit” vote and the possibility of a second referendum could continue to fuel
market uncertainty. Also this week, the Eurozone countries will publish consumer
confidence index as well as a series of CPI inflation data.
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