NN IP lowers agriculture exposure and goes overweight metals
NN Investment Partners (NN IP) Multi-Asset team has moved precious metals, including gold and silver, to overweight. Koen Straetmans, senior strategist Multi-Asset at NN IP explains:
Despite still weak demand seasonally precious metals may find price support in the near term. The Greek uncertainty is expected to linger on, potentially bolstering “safe haven” demand. Also, if a Grexit would nevertheless materialize or if we gradually move in this direction the ECB is expected to intensify its contagion measures including QE.
Interest rates, which are the opportunity cost for gold and silver, are expected to stay low in this environment. Greek and Chinese turmoil may simultaneously reduce lift-off comfort at the Fed’s Board and delay exit. Furthermore US inflation expectations did rise again against which gold is still perceived a hedge.
In terms of demand for precious metals, Indian physical demand improved somewhat on an above average Monsoon in June. US retail coin sales did also rise in June while some “safe haven” demand can equally be expected in China, in case the Chinese stock markets take another leg down. Investors’ positioning finally in both gold and silver is back low, including in physically backed gold ETFs for the year.
NN IP has also lowered its agriculture exposure by closing the grains overweight (both corn and wheat). It has kept coffee as an overweight though. Secondly, it closed its underweight position in energy by closing the crude oil underweights (both Brent and WTI).
Equally remarkable since mid-June has been the sharp rebound in the Agriculture segment. Grains like corn and wheat most notably staged a sharp recovery as changing US and global weather combined with sector specific positioning completely reversed the outlook and hence prices. These sharp price moves led us to change our positioning quite substantially. First, we lowered our Agriculture exposure by closing the Grains overweight (both Corn and Wheat). We keep Coffee as an overweight though. Secondly, we closed our underweight position in Energy by closing the crude oil underweights (both Brent and WTI).