Commodities have seen a drastic slowdown in inflows in August compared to the rest of the year, with only gold remaining a bright spot for investors as optimism wanes, latest figures reveal.
BlackRock’s latest Global ETP Landscape report has shown inflows into commodity ETPs have diminished in August, with the asset class only attracting $600m, compared to billions that have flown in over the course of the year.
A number of areas within the commodity space suffered outflows and only gold continued to take in substantial amounts of money, as investors remain convinced of the safe-haven benefits of the precious metal, though even gold ETPs have seen inflows dwindle.
Commodities have had a tough few years, with money continuously leaving the sector and dire performance. This year to date performance has picked up, with the Bloomberg Commodity index, which tracks 22 raw materials, returning 5.5%, but over 12 months it remains 6.5% down, and the five-year picture also remains subdued.
In terms of flows, 2016 has been a turnaround year for the sector so far. Many commodity-focused ETP providers, such as ETF Securities, have been reporting strong flows into this area as investors found their appetite for the asset class once more, and some commentators have been touting the end of the commodities rout.
Yet the latest flow figures suggest investors’ euphoria may be be waning, as BlackRock reports outflows from ETPs focused on crude oil and other commodities and precious metals in August, though gold and silver are still attracting money.
Over the year to the end of the month, commodity ETPs have seen total inflows of $32.2bn, nearly triple the amount they took in during the same period in 2015 ($12.9bn).
However, August saw just $600m of net inflows, and recorded outflows of $400m from crude oil ETPs, $300m from other commodities and $100m from precious metals, though silver has continued to take in money.
The only standout remains gold, which has taken in another $1bn during the month, though even this figure marks a slowdown from the previous months – half the amount recorded in July, and a quarter of that seen in May and June. Over the year to date, gold is also the most popular investment, taking in a total of $26.1bn.
TrackInsight’s research shows that in the European ETP space, products tracking the price of physical gold have attracted more interest than those tracking gold producers, with gold ETFs recording $843m of inflows this year to date, while gold producer ETFs have attracted less than half at €342m.
In terms of products, by far the most popular gold ETF was the UBS ETF (CH) – Gold (CHF) hedged A-dis. Denominated in Swiss francs, this offers a double-whammy of safe-haven assets – gold and the Swiss currency. However, even this product has seen a reversal of inflows in August.
On the gold producer side, flows also seem to be subsiding, with a number of funds seeing declines in assets following a strong period, including the iShares Gold Producers and the ComStage NYSE Arca Gold BUGS UCITS ETFs.
One thing is certain: the tough times for commodities are not over yet, and even gold, for all its shine, may not remain the darling of investors for long. The remainder of the year will reveal whether this shift in sentiment is short-lived or a longer-term story.