Key Commodity Themes - Amazon S3€¦ · Key Commodity Themes. For Use With Institutions Only, Not...
Transcript of Key Commodity Themes - Amazon S3€¦ · Key Commodity Themes. For Use With Institutions Only, Not...
Maxwell Gold
Director of Investment Strategy
Gradient Investments Elite Advisor Forum
October 5th, 2017
Key Commodity Themes
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 2
Global growth outlook remains positiveGROWTH
(5.0)
(3.0)
(1.0)
1.0
3.0
5.0
7.0
9.0
20
01
20
02
20
02
20
03
20
04
20
05
20
06
20
07
20
07
20
08
20
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20
10
20
11
20
12
20
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20
14
20
15
20
16
20
17
Gro
ss D
om
est
ic P
rod
uct
(%
)
EM-DM Spread Emerging Markets (EM)
Developed Markets (DM)
Source: Bloomberg, ETF Securities. Chart data from 12/31/99 to 06/30/17.
-1
0
1
2
3
4
5
6
44
46
48
50
52
54
56
2013 2014 2015 2016 2017
Ind
ust
ria
l Pro
du
ctio
n (
% y
ea
r o
ve
r y
ear)
Pu
rch
asi
ng
Ma
na
ge
rs’ I
nd
ex (
PM
I)
Global Manufacturing (lhs)
Global Industrial Production (rhs)
Source: Bloomberg, ETF Securities. Chart data from 02/28/10 to 08/31/17.
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 3
Commodities tend to perform well in rising growth
Source: Bloomberg, ETF Securities. Chart data from 01/30/76 to 02/28/17. Commodities = S&P GSCI TR Index, Global equities = MSCI World TR Index, Bonds= Barclays US Aggregate TR Index, REITs (Real Estate Investment Trusts) = FTSE All Equity REIT Index, Cash = 3 month US Treasury bill. High/low inflation = top/bottom 20% of months in US headline consumer price index (CPI), Slowing/rising growth = US ISM Purchasing Manufacturing Index (PMI). All above charts measuring average monthly return for respective asset class.
0.0% 0.5% 1.0% 1.5% 2.0%
Bonds
Cash
Global Equities
Commodites
REITs
-0.5% 0.0% 0.5% 1.0% 1.5%
Global Equities
Commodites
Cash
Bonds
REITs
A verage monthly return
0.0% 0.5% 1.0% 1.5% 2.0%
Cash
Bonds
Global Equities
REITs
Commodites
0.0% 0.5% 1.0% 1.5%
Commodites
Cash
Global Equities
Bonds
REITs
A verage monthly return
Ris
ing
Gr
ow
th+
Hig
h I
nfl
ati
on
Slo
win
g G
ro
wth
+H
igh
In
fla
tio
n
Slo
win
g G
ro
wth
+L
ow
In
fla
tio
n
Ris
ing
Gr
ow
th+
Lo
w I
nfl
ati
on
GROWTH
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 4
INFLATION
Core inflation cools but US Dollar weakens
(2.0)
(1.5)
(1.0)
(0.5)
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Pe
rce
nt
(%)
Final Demand PPI
Headline CPI
Core CPI
Core PCE
Headline PCE
Source: Bloomberg, ETF Securities. Chart data from 12/31/99 to 07/31/17.
0.010
0.011
0.012
1.60
1.65
1.70
1.75
1.80
1.85
1.90
1.95
2.00
2.05
2.10
De
c-16
Ja
n-1
7
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Ju
n-1
7
Ju
l-17
Au
g-1
7
US
Do
lla
r In
de
x (
inv
ert
ed)
US
10
Ye
ar B
rea
kev
en
Ra
te (
%)
US Inflation Expectations (lhs)
US Dollar (inverted, rhs)
Source: Bloomberg, ETF Securities. Chart data from 12/31/99 to 09/12/17.
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 5
Commodities rank among top inflation hedges
Source: Bloomberg, ETF Securities. Chart data from 01/02/91 to 02/28/17. E&P = exploration and production.
0% 10% 20% 30% 40% 50% 60%
Natural gasPalladium
Gathering & ProcessingEnergy
PlatinumNatural gas pipelines
US Midstream infraUS Energy infra
US E&P infraOil & Gas stocks
Crude oil pipelinesSoft commodities
SilverCrude oilSoybeans
All commoditiesN. American RE Stocks
Health CareUtilities
US Downstream infra
Return
Infrastructure (infra)
Commodities
Natural resources and other stocks
Real Estate (RE)
INFLATION
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 6
Commodities tend to track inflation surprises
-5
-4
-3
-2
-1
0
1
2
3
4
0
50
100
150
200
250
30019
92
199
3
199
4
199
5
199
6
199
7
199
8
199
9
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Pe
rce
nt
(%)
Ind
ex
lev
el
Bloomberg Commodity Index (lhs) Unexpected Inflation, 3-month average (rhs)
Source: Bloomberg, US Federal Reserve. ETF Securities. Chart data from 03/31/92to 02/28/17.
INFLATION
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 7
Flows move back into Emerging Markets (EM)
(6,000)
(4,000)
(2,000)
-
2,000
4,000
6,000
8,000
165,000
167,000
169,000
171,000
173,000
175,000
177,000
179,000
181,000
183,000
185,000
Ja
n-1
5
Fe
b-1
5
Ma
r-15
Ap
r-15
Ma
y-1
5
Ju
n-1
5
Ju
l-15
Au
g-1
5
Se
p-1
5
Oct
-15
No
v-1
5
De
c-15
Ja
n-1
6
Fe
b-1
6
Ma
r-16
Ap
r-16
Ma
y-1
6
Ju
n-1
6
Ju
l-16
Au
g-1
6
Se
p-1
6
Oct
-16
No
v-1
6
De
c-16
Ja
n-1
7
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Ju
n-1
7
Ju
l-17
US
$ (
mil
lio
ns)
US
$ (
mil
lio
ns)
Emerging Market Equity - Net New Flows (rhs) Cumulative Flows (lhs)
Source: Bloomberg, ETF Securities. Chart data from 1/1/15 to 7/31/17.
EM
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 8
Commodities yet to capture EM growth rally
70
75
80
85
90
95
100
105
110
600
700
800
900
1000
1100
1200
Ja
n-1
5
Fe
b-1
5
Ma
r-15
Ap
r-15
Ma
y-1
5
Ju
n-1
5
Ju
l-15
Au
g-1
5
Se
p-1
5
Oct
-15
No
v-1
5
De
c-15
Ja
n-1
6
Fe
b-1
6
Ma
r-16
Ap
r-16
Ma
y-1
6
Ju
n-1
6
Ju
l-16
Au
g-1
6
Se
p-1
6
Oct
-16
No
v-1
6
De
c-16
Ja
n-1
7
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Ju
n-1
7
Ju
l-17
Au
g-1
7
Se
p-1
7
Ind
ex
Le
ve
l
Ind
ex
Le
ve
l
MSCI Emerging Market Index (lhs)
Bloomberg Commodity Index (rhs)
Source: Bloomberg, ETF Securities. Chart data from 1/1/15 to 09/08/17.
EM
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 9
Supply side destruction expected to continueSUPPLY
-50%
-30%
-10%
10%
30%
50%
70%
90%
Wh
ea
t
Co
tto
n
Co
rn
Pa
lla
diu
m
So
ybe
an
s
WT
I O
il
Na
tura
l G
as
Iro
n O
re
Nic
ke
l
Pla
tin
um
Bre
nt
Oil
Alu
min
ium
Sil
ve
r
Co
pp
er
Zin
c
% d
evia
tio
n f
rom
pri
ce
Commodities Marginal Cost of Production
Source: Bloomberg, Morgan Stanley, IEA, USDA, ETF Securites. Data as of 09/08/17.
% price is above/below at 90th percentile marginal cost
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 10
Valuations across asset classes still stretchedMACRO
0
5
10
15
20
25
30
United States Europe Japan EmergingMarkets
Pri
ce
to
Ea
rnin
gs
(P/
E)
Ra
tio
Current P/E Ratio
10 Year Avg P/E Ratio
Source: Bloomberg, ETF Securities. Chart data from 12/31/06 to 08/31/17
-2
0
2
4
6
8
10
12
14
199
0
199
2
199
4
199
6
199
8
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
10
Ye
ar
So
ve
re
ign
De
bt
Yie
ld
US Germany
UK Japan
Source: Bloomberg, ETF Securities. Chart data from 12/31/06 to 09/08/17
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 11
VIX & valuations have strong inverse correlationMACRO
R² = 0.6107
5
10
15
20
25
30
35
40
45
16 17 18 19 20 21 22 23
VIX
In
de
x le
ve
l
Price to Earnings Ratio
Source: Bloomberg, ETF Securities. Data from 01/01/15 to 06/30/17.
Jan 2015 - June 2017
Current
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 12
Balance sheet normalization poses risksMACRO
0
100
200
300
400
500
600
700
800
900
2007 2009 2011 2013 2015 2017 2019
Ind
ex
re
ba
sed
to
10
0 i
n M
ay
20
06
Central bank balance sheet levels
Swiss National Bank (SNB)
US Federal Reserve (Fed)
European Central Bank (ECB)
Bank of England (BOE)
Proposed Fed Normalization Path
Source: Bloomberg, ETF Securities. Data from 05/31/06 to 08/31/17.
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 13
VIX does not reflect true market risksMACRO
9
14
19
24
29
34
39
2012 2013 2014 2015 2016 2017
Ind
ex
Le
ve
l
Source: Bloomberg, ETF Securities. Data from 01/01/12 to 09/08/17.
VIX Index
ETF Securities VIX Model
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 14
Short term volatility benefited gold and platinumMACRO
6
2324
6
1 1 1
9
20
15
12
4 4
21
25
5
0
5
10
15
20
25
30
-20% -15% -10% -5% 0% 5% 10% 15% 20%
Fre
qu
en
cy (
# o
f w
ee
ks)
Weekly Return during 2 Standard Deviation move in VIX Index
Gold Silver Platinum
Source: Bloomberg, ETF Securities. Data from 03/30/90 to 009/08/17.
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 15
Gold performed well in persistent drawdownsMACRO
Total Return Gold Silver Platinum S&P 500 Date range
2008 Financial Crisis 10.5% -5.0% -28.2% -47.1% 8/28/08 - 03/09/09
Black Monday 8.4% -11.8% -14.5% -33.5% 8/25/87 - 12/04/87*
2002 Recession 6.8% 7.0% 0.3% -31.5% 3/19/02 - 07/23/02
Dot-com Bubble I -5.8% -10.5% 1.3% -22.7% 9/29/00 - 04/04/01
Gulf War 6.8% -10.8% -6.4% -19.2% 7/16/90 - 10/11/90
Long Term Capital Mgmt -6.4% -12.7% -10.1% -19.2% 7/17/98 - 08/31/98
US Credit Downgrade 8.2% -16.6% -13.5% -18.4% 7/07/11 - 10/03/11
Subprime Meltdown 31.8% 45.8% 48.0% -17.9% 10/09/07 - 03/10/08
Dot com Bubble II 6.8% 9.4% 5.9% -18.4% 8/24/01 - 09/21/01
Flash Crash 4.7% -2.6% -13.8% -15.6% 4/23/10 - 07/02/10
Average Return 7.2% -0.8% -3.1% -24.4%
Source: Bloomberg, ETF Securities. Data: 8/25/87 to 10/3/11. * S&P 500 price return.
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 16
Important InformationThe statements and opinions expressed are those of the author and are as of the date of this report. All information is historical and not indicative of future results and subject to change. Reader should not assume that an investment in any securities and/or precious metals mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results.
The ETFS Silver Trust, ETFS Gold Trust, ETFS Platinum Trust, ETFS Palladium Trust and ETFS Precious Metals Basket Trust are not investment companies registered under the Investment Company Act of 1940 or commodity pools for purposes of the Commodity Exchange Act. Shares of the Trusts are not subject to the same regulatory requirements as mutual funds. These investments are not suitable for all investors. Trusts focusing on a single commodity generally experience greater volatility.
Commodities generally are volatile and are not suitable for all investors. Trusts focusing on a single commodity generally experience greater volatility. Please refer to the prospectus for complete information regarding all risks associated with the Trusts. Shares in the Trusts are not FDIC insured and may lose value and have no bank guarantee.
The value of the Shares relates directly to the value of the precious metal held by the Trust and fluctuations in the price could materially adversely affect investment in the Shares. Several factors may affect the price of precious metals, including:
• A change in economic conditions, such as a recession, can adversely affect the price of the precious metal held by the Trust. Some metals are used in a wide range ofindustrial applications, and an economic downturn could have a negative impact on its demand and, consequently, its price and the price of the Shares;
• Investors' expectations with respect to the rate of inflation; • Currency exchange rates; • Interest rates; • Investment and trading activities of hedge funds and commodity funds; and • Global or regional political, economic or financial events and situations. Should there be an increase in the level of hedge activity of the precious metal held by the Trustor producing companies, it could cause a decline in world precious metal prices, adversely affecting the price of the Shares.
Also, should the speculative community take a negative view towards the precious metal held by the Trusts, it could cause a decline in prices, negatively impacting the price of the Shares. There is a risk that part or all of the Trusts’ physical precious metal could be lost, damaged or stolen. Failure by the Custodian or Sub-Custodian to exercise due care in the safekeeping of the precious metal held by the Trusts could result in a loss to the Trusts.
For Use With Institutions Only, Not For Use with Retail Investors.
Not for Public Dissemination. Past performance is not indicative of future results. 17
Important InformationThe Trusts will not insure its precious metals and shareholders cannot be assured that the custodian will maintain adequate insurance or any insurance with respect to the precious metals held by the custodian on behalf of the Trust. Consequently, a loss may be suffered with respect to the Trust’s precious metal that is not covered by insurance.
Commodities generally are volatile and are not suitable for all investors.
Investors buy and sell shares on a secondary market (i.e., not directly from Trusts). Only market makers or “authorized participants” may trade directly with the Trusts, typically in blocks of 50k to 100k shares.
Diversification does not eliminate the risk of experiencing investment losses.
This material must be accompanied or preceded by the prospectus. Carefully consider each Trust’s investment objectives, risk factors, and fees and expenses before investing.
Please view the prospectus at http://etfsecurities.com/etfsdocs/USProspectus.aspx
ALPS Distributors, Inc. is the marketing agent for ETFS Silver Trust, ETFS Gold Trust, ETFS Platinum Trust, ETFS Palladium Trust and the ETFS Precious Metals Basket Trust.
Maxwell Gold is a registered representatives of ALPS Distributors, Inc.
ETF 001213 09/30/18