Commodities: “There was a lot going on with Xetra-Gold”

Gold ETCs continue to dominate trading in commodity products. After the long-lasting high, the countermovement in recent days came as a surprise. With the oil price fluctuating wildly, short-term investments are on the rise.

8 November 2024 FRANKFURT (Frankfurt Stock Exchange). The global volume invested in commodity ETCs has risen again in recent weeks. Mobeen Tahir from WisdomTree reports further net inflows in October. The segment was clearly dominated by precious metal products with a share of over 80 percent, after the gold price in particular once again performed very robustly. The price of the troy ounce reached a new record high of just under 2,800 dollars at the end of last month. “Global capital flows in exchange-traded gold products have been positive since May,” explains Tahir.

Strong demand for gold ETCs

In Deutsche Börse's ETC segment, too, the three best-selling products last month were all gold ETCs. “Xetra-Gold in particular saw a lot of activity,” reports Ivo Orlemann from ICF Bank about the most popular gold investment by far in October (DE000A0S9GB0). In addition to iShares Physical Gold (IE00B4ND3602), Invesco Physical Gold (IE00B579F325) was also heavily traded, although Orlemann has recently observed increased selling here.

Among Société Générale's commodity derivatives, gold was also among the top ten most-bought securities in the past four weeks. Investors have increasingly bet on rising prices, as Patrick Kesselhut explains. Two classic call warrants with only a few weeks to maturity were particularly popular, for example a gold call maturing shortly before Christmas with a strike price of 2,600 dollars (DE000SW76T18). The warrant more than doubled in the last three weeks of October, but had to give up almost all of its gains in the course of the correction that has been underway since the beginning of November.

US election with surprising consequences

The fact that the setback in the gold price gained even more momentum after the result of the presidential election in the US came as a surprise to the analysts at Commerzbank. In the run-up to the election, they had spoken of a “likely rise in the price of gold” in the event of a Trump victory, because inflation is likely to be higher under the Republican than under Harris and there is a risk “that the independence of the US Federal Reserve could be challenged, making an appropriate monetary policy response to higher inflation more difficult”.

Ulrich Stephan, Chief Investment Strategist at Deutsche Bank, suspects that the falling prices for gold and silver after the election are “primarily due to the very firm US dollar and the high yields”. However, one reason could also be “that there are clear majorities in the USA and no prolonged deadlock”. At Société Générale, a freshly launched Best Unlimited Turbo Put on gold (DE000SY80CU3) was “the third most traded product ever” on Wednesday, according to Kesselhut. Thanks to very high leverage, the put, which gains in value when gold prices fall, increased more than sevenfold at times during the day.

Oil production remains curbed

In recent weeks, the price of oil has repeatedly been characterized by strong price fluctuations without a clear upward or downward trend. According to Tahir, geopolitical developments in the Middle East were primarily responsible for this. Since the beginning of November, Brent and WTI have been on the rise again, which Commerzbank attributes to the fact that the voluntary production cuts by eight OPEC+ countries are to be maintained in full until the end of the year. In view of weakening demand and rising oil supply outside OPEC+, commodity strategists believe that there is “no scope to expand production without risking oversupply and a fall in prices”.

In commodity securitization trading on Xetra in this environment, WisdomTree's ETCs on Brent Crude Oil (JE00B78CGV99) and WTI Crude Oil (GB00B15KXV33) were traded in particular. A Factor 3x Long warrant on Brent Crude Oil (DE000SB3T5M4) appears relatively high up in the Société Générale turnover lists. Overall, Kesselhut reports a significant overhang of long Brent products bought. In addition to factor warrants, knock-out products were in particular demand.

From Thomas Koch, 8 November 2024, © Deutsche Börse