Commodity ETFs witness strong net flows on inflation concerns

While the U.S. Federal Reserve seems reluctant to make a swift move to fend off inflation today, investors have acted yesterday. Commodity ETFs have been one of the major capital magnets – attracting over $2.8 billion since the beginning of the year – out of which $2.1 billion went into Gold ETFs – a known anti-inflation asset class.

According to a recent Vanguard research, commodities stand apart as a vehicle for hedging against unexpected inflation. The research, led by Sue Wang, Ph.D., an assistant portfolio manager in Vanguard Quantitative Equity Group, found that a 1% rise in unexpected inflation would produce a 7% to 9% rise in commodities.

Other than Gold ETFs, Multicommodity and Silver ETFs drew $683 and $148 million respectively. Meanwhile, Crude Oil and Gas commodities ETFs witnessed an outflow of $350 million year-to-date – likely linked to the ongoing tensions between Russia, Ukraine, and NATO.

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