Commodities generally performed poorly due to weaker economic data and concerns about the economic outlook.
Gold was one of the few commodities to rally this month, achieving a month-end record high price of $2,484/oz.
Commodity ETPs saw net outflows in July, albeit at a relatively low level, with broad commodities experiencing heavy selling.
Commodities generally performed poorly in July owing to weaker economic data and concerns about the economic outlook. The Bloomberg Commodity Index returned -4.0% for the month, led lower by energy and industrial metals with gold being one of the few commodities in positive territory for the month.
Gold ended July at $2,448, a new month-end record price, up 5.2% from the previous month-end. The traditional relationships with USD strength and US real yields reasserted themselves, as ETF investors returned to the asset class. For a deeper dive into the performance of gold, please see our monthly gold article.
In addition to concerns over the growth outlook, oil prices weakened in July following a bearish report from the International Energy Agency. The report showed that Q2 global crude consumption had the smallest increase since late 2022, with Chinese demand actually contracting for the period.
While oil prices fell due to a combination of weaker data raising concerns over the outlook for global growth, an International Energy Agency report indicating waning demand during Q2, and systematic traders selling as key technical levels were breached, Natural Gas was the worst performer in the energy sector during July. This was largely driven by cooler weather forecasts and therefore lower demand for air conditioning in the US along with reports showing that storage levels remain high at a time when demand is low.
While Silver, Platinum and Palladium all suffered negative returns in July, Gold rallied. It appears that the traditional support of a weaker US Dollar and lower real yields contributed to gold’s strength, with further support mid-month coming from Trump extending his lead in the US presidential polls before Biden withdrew from the race. While increased US political uncertainty saw gold come back from the highs, prices remained firm into month end.
Industrial metals had negative returns across the board in July, driven by weaker data, higher inventories and lower demand. In particular, the lack of stimulus from China’s Third Plenum (long term social and economic policy plans to advance the Chinese economy), at a time when the US economy appears to be weakening, was a key driver for industrial metals over the month.
Agricultural commodities continued to have mixed fortunes in July with grains and softs generally weaker while livestock held up better. The US Wheat crop is expected to be the biggest in eight years with strong crops expected elsewhere in the world, while Corn prices also fell on concerns about oversupply. Livestock rallied on some short covering following signs of delayed seasonal demand.
Commodity ETPs experienced net outflows in July, albeit at a fairly low level (-$0.2bn), but the flows between different commodity themes were broadly in line with their performance. Gold ETPs saw further net inflows ($1.0bn) with gold being one of the few commodities to rally during the month. Meanwhile Broad Commodity ETPs experienced relatively heavy selling (-$0.7bn), along with Single Commodity ETPs (-$0.6bn) which was primarily due to outflows from ETPs focused on oil and energy. Flows across other commodity categories were muted.
Gold declined 3.7% in November, as the market factored in the possible implications of Trump’s second term, with some commentators predicting US interest rates remaining higher for longer. The metal subsequently found support and recovered some of its losses in the latter part of the month. Discover insights into the key macro events and what we think you should be keeping your eyes on in the near term.
The most popular way most investors gain exposure to commodities is through exchange-traded products. You can gain exposure to a single commodity’s price via an exchange-traded commodity (ETC) or to a basket of commodities, such as those represented by the BCOM Index, via an ETF.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
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Data source Invesco/ Bloomberg as at 31 July 2024 unless otherwise stated
Views and opinions are based on current market conditions and are subject to change.
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