Investors continue to build gold positions, ETF Securities says

ETF Securities long gold exchange traded commodities (ETCs) recorded $246m inflows over the last week, with cumulative net inflows for the past 5 weeks at $845m.

“Investors appear to be building their gold positions to hedge against continued government failure to find solutions to the crisis. With Spanish 10yr bond yields remaining uncomfortably high, at levels around 6.5%, and Italian yields also approaching unsustainable levels, European officials are running out of time to find a solution to ease the debt crisis,” analysts at the ETCs provider said.

Gold ETCs continued to be some of the most highly traded exchange traded product on most European exchanges.

Meanwhile, long silver ETCs saw $15m inflows as silver price dropped below $27 last week.

“In addition, net speculative futures positioning is now back to end 2011 levels. It appears some investors are taking the recent sharp silver price decline as an opportunity to build long positions, likely on the view that if gold moves up, silver will may benefit even more strongly,” ETF Securities said.

ETFS Short Copper had $13m of outflows, based on better than expected US building permits data and expectations of further stimulus from the Fed.

“Home-building permits in the US picked up last week, climbing to the highest annual level since September 2008. As the construction sector is the biggest consumer of copper, this may provide support to copper demand in the medium term,” analysts said.

Looking ahead, investor’s appetite for those products will be influenced by the outcome of the European summit on June 28-29 with hopes that European leaders will move towards fiscal integration, a broader and more aggressive plan to backstop the European banking system, and measures to revive the economy.

“On the data front, the focus will likely be on the US GDP data release and housing numbers, as signs of a further slowdown in the US economy would increase the chances of QE3 and likely boost the gold price. German retail sales and employment data will also be watched closely to assess the slowdown in Europe’s biggest economy,” analysts said.

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