US nonfarm payrolls jobs data surprised to the upside last week, fuelling expectations that the Federal Reserve will move to ‘taper’ its bond buying program in H2 2013.
While jobs numbers have been better than expected recently, rising bond yields are likely to give the US central bank a reason to keep current stimulus activities in place.
Market participants appear to be largely ignoring other mixed US data, like last week’s disappointing reading for the US manufacturing ISM index. We expect investors will need to revise currently overly hawkish expectations regarding the Fed’s activities in coming months.
Nevertheless, investor appetite for industrially-sensitive commodities like copper and platinum group metals (PGMs) has risen in line with tighter supply conditions and improving prospects for the global economy.
In our view, the continuation of the status quo regarding Fed stimulus will also provide additional support for cyclical commodities.
Platinum ETPs receive the largest inflows in over 8 months as labor unrest continues to plague South African PGM production. ETF Securities’ Platinum ETPs received another US$67 mn of inflows last week, as the wage negotiation season in South Africa officially started last week.
With over 70% of the world’s supply of platinum mined in South Africa, supply disruptions and political hurdles in the country can have a big impact on prices.
Uncertainty has been the key catalyst for higher platinum prices in 2013, and recent developments suggest this isn’t likely to change anytime soon. While platinum ETPs have seen 3 consecutive weeks of inflows, palladium ETPs registered their first modest inflows in six weeks.
ETFS Copper (COPA) receives second-largest inflows on record, totalling US$91mn. Strong inflows to COPA were the largest since early-September 2012, as copper market continues to tightening. Additionally, ETFS Daily Short Copper experienced the largest withdrawal in 3 years, totalling US$30mn, confirming the positive investor sentiment.