CONTANGO WATCH: Gold continued to widen its contango by the narrowest of margins this past week, moving at a snail’s pace toward its five-year average historical roll for this date. While prices on the yellow metal itself remain steady and unable to break the $1800 level, demand is still strong. Three gold ETFs topped the inflows table in our Weekly Commodity Flows Report: two miners and a physical holdings fund.
In a curious turn of events, those two miners and two others dominated the bottom performers chart, dropping between 10.35 to 11.58 percent for the week. The governor of the Benguet region of the Philippines, Nestor Fongwan, blames the drop on small-scale miners illegally trading gold to China by way of Hong Kong, the PhilStar reports. Fongwan cites the heavy government taxation as the driving force behind the illegal activity.
However, only two of the funds making the chart had any exposure to Hong Kong and China. The Market Vectors Junior Gold Miners (NYSE Arca: GDXJ),which topped the chart, losing a whopping total of 11.58 percent, holds 1.21 percent in Hong Kong and 1.13 percent in China. The other fund, the iShares MSCI Global Gold Miners (NYSE Arca: RING), lost the least, at only 10.35 percent while holding 0.67 and 2.05 percent in Hong Kong and China, respectively.
With steady prices, dropping returns and yet large inflows, ETF investors should pay close attention to what their fund is accessing, and how, or if, that access is driving returns.
ROLL COSTS: It costs investors 0.77 percent annualized to roll front-month gold contracts, up from a cost of 0.73 percent.
BOTTOM LINE: Mild Contango
Has oil moved into backwardation yet? What does corn’s roll yield look like? How do you know when it’s time to buy—or sell?
Each week, we investigate the futures curves of the most important commodities in the U.S., helping investors better understand the market and seize buy-and-sell opportunities as soon as they arise. For an easy-to-understand explanation of contango, backwardation and roll yields, please click here to go to our Hard Assets University.
To see current contango curve and front-month roll costs (Dec. 12 – Jan. 13) for each of our selected commodities, please select a sector or commodity below (or read the whole report):
Data as of close on November 16, 2012
Data courtesy IndexUniverse.com
|Current Roll||Previous Week's Roll||Past Year Average Roll||Historical 11/16 5YR Annualized Roll|
|HH Natural Gas||42.56%||52.17%||3.55%||73.60%|
|Soft Commodities||Coffee C||15.36%||14.69%||1.30%||10.66%|
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