Recent price corrections in the commodity markets have presented a buying opportunity to many investors.

Amidst deteriorating economic conditions and further signs of slowing global growth, commodity Exchange Traded Products (ETPs) in the energy and precious metals sectors attracted net new inflows during the second quarter. Investors took advantage of recent price movements in crude oil and natural gas, while gold and silver products were also in demand.

The global commodity ETP market contracted by 7% during the second quarter to reach US$175bn, largely as a result of the broad price declines which have occurred in recent months. Robust demand for products that track single commodities such as gold, silver and oil helped to offset outflows from those which provide more broadly diversified exposure to the asset class. Overall, net outflows from all commodity ETPs worldwide amounted to just US$1.1 billion.

Precious metals shine

Precious metals ETPs attracted net inflows of US$702 million during the second quarter, as investors looked to hedge against continued global financial, economic and political turmoil. Gold ETPs attracted the largest inflows in the sector – with US$570 million of net new funds – followed by silver ETPs, which attracted a further US$269 million.

Palladium ETPs attracted US$36 million in net new assets. The resilience of the US and Chinese gasoline auto markets – palladium’s main sources of demand – relative to other industries in those countries may help to explain the demand. By contrast, demand for platinum – a metal with significant exposure to the rapidly slowing European diesel auto markets – was less favorable. Despite relatively strong inflows during the first quarter of the year, platinum ETPs saw US$80 million in net outflows between April and June.

Energy ETF demand volatile

ETPs that provide exposure to natural gas attracted US$205 million in new assets during the second quarter. Higher electricity consumption in the US, driven by warmer than expected weather, was partly responsible for the increase in natural gas demand.

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