ETF Securities has seen flows into its All Commodities ETC so far this year outstrip those into any of its other commodity securities.
The broad-based All Commodities ETC has attracted $40.9m in 2011, bringing its inflows to $410.1m over the past 12 months. In the meantime, demand for the firm's precious metal products has dropped off significantly, after a 12 month period that saw the platform draw over $3.6bn in new money.
According to Deutsche Bank research, commodity ETCs make up roughly 8% of the European ETP industry, but they made headlines last year on the back of strong flows into precious metals and the development of physically-backed industrial metal ETCs.
ETFS Physical Gold has seen inflows of $1.3bn in the past 12 months, while the SPDR Gold Trust closed 2010 with $58.5bn in assets under management (AUM) - making it the second biggest ETP in the world.
2011, so far at least, has been a different story. ETFS lost flows of $152m from its precious metal ETCs last week, fuelled primarily by redemptions of nearly $90m in Physical Gold and $60m in ETFS Gold Bullion Securities.
The company attributes the fall in demand to expectations of higher interest rates together with a lessening in sovereign fears, which has prevented gold from reaching new price highs and prompted investors to step back from the market.
As demand for traditional hard assets falls off, industrial metal ETCs have been there to make up some of the slack. ETFS says its industrial metals platform has experienced its thirteenth consecutive week of positive flows, pulling in nearly $20m already this year. Its physically-backed copper, nickel and tin ETCs have grown collectively to over $30m in AUM since their launch in December.
Platinum and palladium, which are counted as precious metals but have industrial applications, have continued to see inflows this year and even silver, which has a demand profile more closely assimilated to the business cycle, has fared significantly better than gold in the past few weeks.
At the same time, broad expectations of global growth may have helped stoke interest in the diversified ETFS All Commodities ETC, which is invested primarily in energy and agriculture.
ETFS has seen its All Commodities Forward 3 Month ETF climb nearly 5% over the past month and its Global Agri Business ETF rose 3.4% just last week, taking it up 12.4% over a month. Food inflation in China and India, set against a background of historically low inventory levels, is putting sustained pressure on food prices and helping to drive profits for agriculture producers
The US Department of Agriculture recently revised down its estimates for agricultural commodities production for the year, while emerging markets are continuing to show robust growth momentum signifying increasing food consumption. Meanwhile ETFS is planning the launch of a second raft of physically-backed industrial metal ETCs and a number of other providers are rumoured to be preparing their own offerings in the field. 2011 could yet be the year commodity ETPs mean more than gold.
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