Slowing global growth has stifled demand for raw materials, pushing down commodity-related exchange traded funds to multi-year lows, with one broad commodity index trading near a five-year low.
The PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC) has declined 7.5% over the past three-months and is hovering around its lowest since September 2010.
Additionally, the iPath Dow Jones-UBS Commodity Index Total Return ETN (NYSEArca: DJP) decreased 8.8% and the iShares GSCI Commodity-Indexed Trust (NYSEArca: GSG) fell 8.7% over the past three months.
The Bloomberg Commodity Index is at its lowest since July 2009 as Brent crude traded at its cheapest since 2012, wheat corn and soybeans also dropped to four-year lows, and gold dipped to a seven-month low, Bloomberg reports. [Bearish ETFs for Gold’s Lost Luster]
Cotton, soybean, corn and wheat all plunged into a bear market this year as U.S. farmers begin to harvest a predicted record bumper crop. [MOO-ving Out: Investors Depart Agribusiness ETFs]
The broad weakness across the commodities space has weighed on commodity ETFs. For instance, DBC includes a heavy tilt toward energy-related commodities, including Brent crude 12.7%, Light crude 13.1%, RBOB gasoline 12.7% and heating oil 12.9%, along with corn 4.3%, soybeans 5.0%, wheat 4.4% and gold 8.0%. [Poor Fundamentals Sap Energy From Oil ETFs]
Fueling the decline in prices, the Eurozone recovery stalled in the second quarter while Japan contracted by the most in over five-years. Meanwhile, U.S. crop yields at a record high, U.S. oil production is poised to reach a 45-year high due the shale boom and food prices declined to their lowest in almost four years.
“We have had disappointing growth data,” Kevin Norrish, an analyst at Barclays Plc, said in the article. “Growth now looks a bit less promising and supplies in many commodities are quite robust.”
Additionally, the sudden strength in the U.S. dollar is pressuring commodities, which are priced in USD and are more expensive to foreign buyers.
“The strong wall of dollar strength and prospects of a rate hike are pushing gold lower,” Ira Epstein, the president of his namesake division at the Linn Group Inc., said in the article.
PowerShares DB Commodity Index Tracking Fund
For more information on the commodities space, visit our commodity ETFs category.
Max Chen contributed to this article.