The first quarter of 2012 saw record total assets under management in the commodity-based exchange-traded products, according to a report released by ETF Securities.
Commodity exchange traded products (ETPs) got off to a strong start in 2012, with inflows in the first quarter rising by $7.5 billion, the largest quarterly rise since the second quarter of 2010.
A rebound in US economic growth and an orderly restructuring of Greek sovereign debt led to a general rise in risk appetite and helped drive broad-based buying of commodity ETPs.
The combination of higher commodity prices and increased demand for exchange traded products pushed assets in commodity ETPs up $19 billion to $189 billion by the end of the quarter, the highest quarter-end level on record.
According to the report, what was most remarkable about commodity ETP inflows in 1Q 2012 was not just that they were the largest quarterly inflows in a year and half, but that the inflows were far more broad-based than in recent quarters.
Historically, precious metals – gold in particular – have tended to be the dominant driver of headline commodity ETP flow trends. In 1Q 2012, however, non-precious metals inflows rose by $3.1 billion, the largest non-precious metals inflows in over two years and not far off the $4.4 billion that flowed into precious metals ETPs during the quarter.
The gold price corrected sharply in the latter part of 1Q 2012 as improvements in the US economy caused investors to scale back their expectations for further near-term quantitative easing from the US Fed and the dollar strengthened as interest rate differentials moved in its favour. Despite the gold price correction, gold ETP demand remained strong, with gold ETPs seeing $3.6 billion of new inflows, the third consecutive quarter of strong inflows.
The largest commodity ETP inflows in 1Q 2012 after gold were into oil. Oil ETPs received nearly $1.2bn of new inflows. The inflows are the largest inflows oil has seen since 2Q 2010, and reverse six consecutive quarters of outflows.
Silver ETPs also saw strong demand in 1Q 2012, with $612 million of net inflows. The rebound in demand stands in direct contrast to the two straight quarters of large redemptions through the second half of last year.