Issuing a bad omen for commodity-related exchange traded funds, the World Bank believes precious metals, oil and soft commodity prices are set to drop.
Broad commodity ETFs have underperformed the broader market this year, with the PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC) flat, the iPath Dow Jones-UBS Commodity Index Total Return ETN (NYSEArca: DJP) up 3.1% and the iShares GSCI Commodity-Indexed Trust (NYSEArca: GSG) 0.9% higher.
Now, the World Bank expects precious metals prices to fall as investors shift away from safe-haven assets and into riskier plays on the expanding U.S. economic outlook and higher borrowing, reports Millie Munshi for Bloomberg.
Year-to-date, the Powershares DB Precious Metals Fund ETF (NYSEArca: DBP), which has a 80.7% position in gold and 19.3% in silver, rose 7.4%, SPDR Gold Shares (NYSEArca: GLD) increased 7.6% and iShares Silver Trust (NYSEArca: SLV) gained 6.4%.
Additionally, the World Bank argues that grains will weaken on rising supplies of rice, corn and wheat. Meanwhile, crude oil will dip as geopolitical tensions dissipate.
Year-to-date, the iPath Grains Total Return Sub-Index ETN (NYSEArca: JJG), which tracks 37.0% soybeans, 19.3% wheat and 43.7% corn, has declined 7.3%, Teucrium Corn Fund (NYSEArca: CORN) fell 10.9% and Teucrium Wheat Fund (NYSEArca: WEAT) decreased 11.8%.
Meanwhile, the United States Oil Fund (NYSEArca: USO), which follows West Texas Intermediate crude oil futures, has increased 5.6% this year, whereas the United States Brent Oil Fund (NYSEArca: BNO) dipped 3.1%.