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

09

20

10

20

11

20

12

20

12

20

13

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)




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



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


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)




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



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



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)


EM



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)


EM



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



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



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



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




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


VIX Index

ETF Securities VIX Model



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




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.



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.



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

http://etfsecurities.com/etfsdocs/USProspectus.aspx

Date post:	30-Jun-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Key Commodity Themes - Amazon S3€¦ · Key Commodity Themes. For Use With Institutions Only, Not...

Documents