Commodity Investments Seen Down $7 Billion in First Quarter

Commodity investment net outflows were $7 billion in the first quarter, one of the weakest on record, because of the liquidation in gold, Barclays Plc (BARC) said.

Assets under management in commodities fell to $409 billion in March, $1 billion lower than in February, Barclays said in a report e-mailed today. Assets were $424 billion at the end of last year, according to the report.

The Standard & Poor’s GSCI Total Return Index of 24 raw materials fell 4.6 percent this month. The index rose 0.8 percent in March and dropped 4.4 percent in February, the most since May. Gold investment outflows reached $9.2 billion in the first quarter as assets in all exchange-traded products rose $70 billion and benchmark indexes in the U.S. climbed to records, BlackRock Inc. said in a report on April 4.

“Aggressive liquidation of gold dragged down aggregate commodity investor flows for Q1,” Barclays analysts including Suki Cooper in New York, said in the report.

Gold ETP holdings declined 168.22 metric tons in April, heading for the biggest monthly drop on record in tonnage terms, according to data compiled by Bloomberg. Prices recovered 12 percent from a two-year low of $1,321.95 on April 16 as coin and jewelry demand expanded.

“We see the potential for further downside in gold from current levels as the pace of ETP liquidation has reached new highs again,” Barclays said.

Commodity assets are breaking their links with other assets, according to the bank.

Platinum group metals are expected to outperform, the bank said. “Palladium has the most constructive fundamentals, yet over the coming months, platinum offers the most potential upside.”

To contact the reporter on this story: Agnieszka Troszkiewicz in London at atroszkiewic@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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