Commodities hit by record outflows as investors flee gold

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Commodity exchange traded products were hit by their strongest outflows on record in the second quarter as investor concern about US monetary policy heightened.

Figures from ETF Securities show total net outflows from commodity ETPs amounted to $19bn over the last three months – with the money being pulled from gold accounting for 97 per cent of this.

Gold ETPs suffered $18.5bn in net outflows over the three-month period, which is the largest quarterly outflows from gold ETPs since the first was launched in 2003. Investors sold $8.7bn from gold ETPs in April, with May and June outflows moderating to $6bn and $3.9bn respectively.

The price of the yellow metal fell by 21 per cent during the quarter when the Federal Reserve said a strengthening US economy could cause it to slow its quantitative easing programme.

Total assets under management in commodity ETPs dropped to $127bn at the end of the second quarter – a drop of $49bn from the $186bn. Two-thirds of the decline in AUM was caused by price falls, with the drop in gold responsible for 51 per cent of the total.

Agriculture ETPs witnessed net outflows of $108m, reversing most of the inflows taken in the first quarter. However these outflows amounted less than one-third of those seen one year earlier.

Outflows from oil ETPs eased from $848m in the first quarter to $170m in the second as tension in the Middle East continued. Natural gas saw outflows in April and May but most of these were reversed by inflows in June.

ETF Securities head of research and investment strategy Nicholas Brooks says: “The moderation may indicate that the worst of the gold ETP selling is now behind us. One bright spot was platinum which saw $712m of inflows on the back of growing supply concerns.

“The outlook for most commodity flows and prices will likely turn on perceptions of whether the recent liquidity squeeze and growth scare in China is temporary or the start of a larger trend.”