Broad commodities performed well in May, rallying early in the month before giving back some of the gains into month end, with the Bloomberg Commodity Index returning 1.8%. Precious and industrial metals continued their rally with both gold and copper hitting new all-time highs during the month, while the energy sector was a net detractor from performance, and agricultural commodities had mixed fortunes.
Source: Bloomberg, Invesco as at 31 May 2024
Having rallied to a new all-time high of US$2,450 early trading on May 20th, the gold closed at US$2,327 by month end, up 1.8% compared to previous month end. The rise in the gold price is mainly due to support from its traditional drivers of falling real yields and a softer US Dollar, along with ongoing central bank purchases.
Source: Bloomberg, Invesco as at 31 May 2024
The oil price drifted lower during May on the back of higher inventories and no further ratcheting up of geopolitical tensions that have been seen in recent months.
Source: Bloomberg, Invesco as at 31 May 2024
Oil started the month on the back foot, fading as the geopolitical premium declined along with a build in inventories which had been expected to fall. While prices stabilised mid-month, they fell again into month end due to mixed messaging over the extension to the production cuts announced at the OPEC+ meeting. Natural gas was the outlier within the energy complex, rallying strongly during May, driven by expectations of increased demand (for aircon) on forecasts for a hotter weather ahead and short covering.
Source: Bloomberg, Invesco as at 31 May 2024
While gold hit new all-time highs of $2,450/oz during the month before fading into month end, its performance was muted compared with silver, which hit the highest levels since 2013, and platinum. Overall, precious metals were boosted by the lower-than-expected inflation print which raised hopes of rates cuts and drove real yields and the US Dollar lower, both of which have historically been supportive of prices for gold and other precious metals. Additional support came from speculation of continued demand from emerging market central banks and Asian households.
Source: Bloomberg, Invesco as at 31 May 2024
Although industrial metals ended the month up, they gave back a lot of the earlier gains into month end. The broadly positive outlook for copper caused a strong rally early in the month with the price per ton initially breaking through the psychological $10,000 mark for the first time in two years before briefly spiking to a new all time high of almost $11,000 per ton. Nickel also rallied strongly, primarily driven by supply concerns, but along with copper gave back much of the gains towards month end on the back of profit taking.
Source: Bloomberg, Invesco as at 31 May 2024
Source: Bloomberg, Invesco as at 31 May 2024
Grains were the winners within agricultural commodities in May. Early in the month, grains benefited from flooding in Brazil and reduced crops in Argentina, with the rally being exacerbated by positioning which led to short covering in the rallying market. Further support for wheat came from cold weather in Russia and stockpiles estimated to be the lowest for eight years.
Source: Bloomberg, Invesco as at 31 May 2024
Commodity ETPs experienced a positive month for net inflows for the first time since last October, with net new assets (NNA) of $0.6bn. Precious metals ($0.5bn) and smart beta exposures ($0.4bn) saw the strongest inflows over the month. However, while gold dominates in terms of AUM, it was platinum ($0.3bn) that saw the strongest inflows within the precious metals space. On the other hand, other single commodity ETPs (-$0.4bn) experienced net outflows, driven by sales of copper as prices spike to record highs.
Source: Bloomberg, Invesco as at 31 May 2024
Monthly gold update
The gold price rose by 2.5% in April; the metal again broke multiple price records. We believe the key drivers for the upward trend in the gold price remain intact. Discover insights into the key macro events and what we think you should be keeping your eyes on in the near term.
An introduction to commodities
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.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security, or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Data source Invesco/ Bloomberg as at 31 May 2024 unless otherwise stated
Views and opinions are based on current market conditions and are subject to change.
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