Delicately stated, these are not the best of days for commodities and the corresponding exchange traded products. With a July loss of 13.6%, the S&P GSCI Total Return Index now resides at its lowest levels since late February 2002.
Not surprisingly, investors are scampering away from some well-know commodities ETFs. For example, the SPDR Gold Shares (NYSEArca: GLD) has bled $1.12 billion in assets this month. Last Friday, GLD and the iShares Gold Trust (NYSEArca: IAU) lost over $302 million in combined assets. [Pros Hate Gold]
“Every single one of the 24 commodities is negative for the month except lean hogs, which is just barely positive by 18 basis points BUT only when taking into account the positive roll yield; otherwise that is negative too, by 14.5%. Throughout the history of the index, 23 commodities have been negative together in a month only once in September 2008 and all 24 were negative together only once in the following month of October 2008. The single performer in September 2008 was gold, clearly different from today,” said S&P Dow Jones Indices Global Head of Commodities Jodie Gunzberg in a note out Monday.
Gold futures and physically-backed ETFs have been pressure this year amid speculation the Federal Reserve is preparing to raise interest rates, which has pushed the dollar higher. Higher interest rates would diminish gold’s attractiveness since the precious metal does not pay interest like fixed-income assets.
GLD and IAU have lost more than 6% over the month and reside at five-year lows. Demand for gold in China is faltering and there is concern India will not be able to pick up the slack.
According to the World Gold Council, India imported 891.5 tons of gold last year while demand was 811.1 metric tons. The council believes consumption will increase to between 900 tons and 1,000 tons this year. [India Unlikely to Stem Gold’s Decline]
The PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC), which holds a basket of agriculture and energy commodities, has bled nearly $85 million in assets this month.
“Thus far, July 2015 is the seventh worst performing month in the history of the S&P GSCI that goes back to January 1970. It is one of the worst months in more than 45 years or 547 months,” adds Gunzberg.
Some commodities ETFs are defying logic. For example, the iShares Silver Trust (NYSEArca: SLV) has added almost $55 million in new assets this month even though it has lost 6% over the past two weeks. The United States Oil Fund (NYSEArca: USO), despite being down 21.7% over the past month, has seen July inflows of $545.6 million.
United States Oil Fund
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.