Barclays pointed out that precious metals, notably gold, have captured around 60% of all commodity inflows this year and believes 2016 could be the best year on record for gold-backed ETFs.
“Much of the investor demand this year been tactical and, unless the asset class continues to generate strong returns in the second half then outflows could resume,” Barclays analyst Kevin Norrish told the Financial Times. “Our price forecasts for key commodities like copper and oil suggest a flat to negative second half of the year, which is likely to encourage some net liquidation.”
Commodities were the best performing asset class of the first half of the year, outperforming global bonds and equities. The Bloomberg Commodity Index was up over 14% over the first six months of 2016. However, since the start of July, the commodity index fell 6.5%, largely due to the drop in crude oil prices, which recently dipped into a bear market.
The PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC) is now only up 7.0% year-to-date after falling off 8.0% over the past month.
For more information on the commodities market, visit our commodity ETFs category.