Tag Archives: jobs

Short-Term Respite For Gold ETFs?

After being crushed in the last three months thanks to a stronger dollar and lower demand, gold saw some respite yesterday on a dovish Fed stance. Gold rallied the most in three months, suggesting strong sentiment in the space, at least for the short term. Gold started off 2015 on a strong note thanks to its safe-haven appeal as doubts over Greece’s fate in the Euro zone and the looming quantitative easing in that debt-ridden region were widespread. However, all returns soon turned into losses as the U.S. economy kept coming up with sturdy data especially on the jobs and housing front which made the case for a sooner-than-expected rate hike stronger. The SPDR Gold Trust ETF (NYSEARCA: GLD ) lost about 6.5% in the last three months while the Market Vectors Gold Miners ETF (NYSEARCA: GDX ) was off about 25%. However, yesterday, GLD added over 1.3% while GDX was up about 2.9%. GDX saw more gains as it often trades as a leveraged play on gold? What Brightens the Yellow Metal? Muted Prospect of September Fed Liftoff: Yesterday’s move was largely the result of speculations of no imminent rate hike decision by the Fed. Minutes from the U.S. Federal Reserve’s July meeting weakened the heightened prospect for Fed rate liftoff in mid September. Some market participants shifted the timeline of a lift-off to December. This in turn weighed on the greenback. The Fed now looks for further stabilization in the labor market and wants to wait for inflation to reach its target. While job data in the U.S. appears strong, apart from the wage gains, low inflation seems to be the real culprit. Inflation is still short of the Fed’s longer-term target due to the free fall in energy prices last year and declining prices of non-energy related imports, per the Fed minute. The Fed expects the price index to remain under pressure in the near term though it will perk up in the medium term. Notably, U.S. consumer prices grew 0.1% in July, down from 0.3% and 0.4% recorded in the prior two months. All these bolstered the appeal for gold. Fight to Safety on China Currency Issue: In early August, Chinese policymakers devalued the country’s currency by 2% against the greenback to boost its waning export profile. Global experts apprehended a currency war in the near future, especially among the Asian export-centric biggies. As s result, yuan devaluation instigated a rout across the global asset classes and spurred a flight to safety for a valid reason. Gold is long viewed as a safe asset and gained an edge over the other assets thanks to this currency issue. Compelling Valuation: Finally, the metal scored higher on a low valuation, compelling investors to trend back into this space, building positions in this otherwise risky metal. GLD is presently trading at a 15% lower level than its 52-week high price prompting many to take advantage of this sudden surge in gold. Bottom Line Having said this, we would like to note that the Fed is due for policy tightening sometime this year. In fact, a group of analysts is still voting for a September lift-off. Inflation will not be barrier for long, and will put pressure on gold yet again. So, this gain seems a short-lived one and will better suit investors with a short-term approach. After all, GLD has a negative weighted alpha of 11.57 , hinting at more pain. Link to the original article here .

Investors Pad The Coffers Of Mutual Funds For The First Week In Three

By Tom Roseen U.S. stocks remained range bound for the fund-flows week ended Wednesday, May 13, 2015. Investors were bombarded by a slew of mixed information that kept them in check. At the beginning of the week investors cheered a better-than-expected first-time jobless claims report that showed layoffs remain at 15-year lows, and they bid the market up further. The Dow Jones Industrial Average posted its strongest one-day point gain in more than three months after nonfarm payrolls data showed a “Goldilocks” scenario that was neither too hot nor too cold. For April the U.S. economy added 223,000 jobs (slightly lower than analysts’ expectations) but far more sanguine than March’s report. The unemployment rate dropped to 5.4% (its lowest level since May 2008), in line with expectations. While the jobs number took some of the funk off the disappointing Q1 2015 GDP number, investors cooled their market enthusiasm for the remainder of the flows week. Despite the positive news of the People’s Bank of China cutting interest rates for the third time in six months, investors appeared weary of the ongoing Greece bailout talks. European stocks fell a bit as investors worried Greece could run out of money in just two weeks. A call by San Francisco Fed President John Williams to start hiking interest rates “a bit earlier” caused a few analysts to postulate a possible June rate hike (although many still believe it might not even happen in September). Then, a weak retail sales report kept the markets in neutral at the end of the flows week, despite some promising reports out of Europe showing France’s and Italy’s economies had entered expansionary territory during Q1 2015. For the first week in three fund investors were net purchasers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), injecting $1.3 billion for the week ended May 13. Investors were generally purchasers of long-term assets, injecting some $3.7 billion into equity funds and $2.7 billion into taxable fixed income funds. However, for the second consecutive week in a row municipal bond funds suffered net redemptions, handing back some $0.2 billion. Also, for the sixth week in seven money market funds witnessed net redemptions-to the tune of $5.0 billion this past week. For the second week in three equity ETFs witnessed net inflows, taking in some $5.2 billion. As a result of a positive nonfarm payrolls report and a slew of good earnings reports during the week, authorized participants (APs) were net purchasers of domestic equity funds (+$4.5 billion), injecting money into the group for the first week in seven. As result of some nervousness over Greece’s bailout talks and maybe a hint of desperation out of China (after its third rate cut in six months), APs-while still being net purchasers of nondomestic equity funds-injected their smallest amount of new money into the group in 14 weeks, to the tune of just $0.6 billion for this past week. As might be expected with interest turning toward domestic issues, the SPDR S&P 500 ETF (NYSEARCA: SPY ) (+$3.7 billion) attracted the largest net draw of all the individual ETFs. The iShares Russell 2000 ETF (NYSEARCA: IWM ) (+$0.6 billion) and the Health Care Select Sector SPDR ETF (NYSEARCA: XLV ) (+$0.5 billion) took in the next largest amounts of net new money for the week. With APs giving commodity funds and nondomestic equity funds the cold shoulder, it wasn’t surprising to see the SPDR Gold Trust ETF (NYSEARCA: GLD ) suffering the largest net redemptions of the group, handing back $522 million for the week. It was bettered somewhat by the iShares MSCI EMU ETF ‘s (NYSEARCA: EZU ) $464 million and the iShares U.S. Real Estate ETF ‘s (NYSEARCA: IYR ) $199 million of net redemptions. For the third consecutive week conventional fund (ex-ETF) investors were net redeemers of equity funds, withdrawing $1.5 billion from the group. Domestic equity funds, handing back $2.2 billion, witnessed their fifteenth straight week of net outflows, even though they had their first week of plus-side returns (+0.98% this past week) in four. Meanwhile, their nondomestic equity fund counterparts witnessed $0.7 billion of net inflows-attracting new money for the sixth week in a row. On the domestic side investors lightened up on large-cap funds and equity income funds, redeeming a net $1.3 billion and $420 million, respectively, for the week. On the nondomestic side international equity funds witnessed $1.1 billion of net inflows, while the emerging-market equity (+$198 million, taking in the lion’s share), Pacific ex-Japan, Pacific Region, and Japanese fund groups attracted net new money, collectively totaling $237 million. For the eighteenth week in 19 taxable bond funds (ex-ETFs) witnessed net inflows, taking in a little less than $1.8 billion. Flexible income funds attracted the largest sum of new money, taking in a net $0.6 billion (their sixteenth straight week of net inflows), while corporate high-yield debt funds suffered net redemptions, handing back some $115 million-for their fourth week of net outflows in a row. Loan participation funds witnessed net inflows (+$221 million) for the first week in four, while posting their first week of negative returns (-0.06%) in eight. Municipal debt funds (ex-ETFs) witnessed their second straight week of net outflows, to the tune of just $86 million for this past week.