The value of assets held by energy investors at year-end topped precious metals for the first time since 2009 as gold’s worst performance in three decades spurred a flight from exchange-traded products backed by bullion.
Precious metal assets under management totaled $105 billion in December, less than the $108 billion of energy assets that made up the largest share of the total $319 billion invested in commodities for the month, Barclays Plc said in a report today. Investors withdrew $40.7 billion in precious metal assets from ETPs, index funds and other products in 2013, compared with outflows of $1.5 billion in the energy sector.
“Holders of gold tend not to be as long-term in their strategy as the holders of energy,” which invest more often in index funds rather than single-asset ETPs, Kevin Norrish, the bank’s head of commodities research for Europe and Asia, said by telephone today. “Gold was quite dangerous last year. The liquidation has slowed down somewhat and we’ve seen a few fresh inflows this year into gold exchange traded products.”
Gold tumbled 28 percent last year in London, the biggest drop since 1981, as some investors lost faith in bullion as a store of value. Holdings in the SPDR Gold Trust, the biggest ETP backed by bullion, tumbled to a five-year low on Jan. 14 before rebounding 2.1 percent since then, according to data from the company tracked by Bloomberg.
Outflows from all commodity investments were $47.2 billion last year, as money was withdrawn from precious metals, energy, base metals and agriculture, Barclays said. That marked the first negative figure since 2002, and compares with inflows of $22.6 billion the previous year. Commodity-related assets under management shrank by about $100 billion, or about 25 percent of the total held at the start of 2013, according to the report. ETPs accounted for about $88 billion of the decline, it said.
Energy prices mostly rose last year, with West Texas Intermediate crude gaining 7.2 percent. U.S. natural gas rose 26 percent, the best performance among 24 commodities on the Standard & Poor’s GSCI gauge, as frigid weather in North America spurred increased demand for heating fuel. The rally extended this year as inventories slid to a 10-year seasonal low.
“There’s a much bigger chance of a price spike higher in 2014 than big move lower in oil prices,” Norrish said, citing strong demand and the potential for geopolitical risks in oil-producing regions. “With the improving economy, with Indian demand still fairly sluggish and with better investment prospects on the horizon, unless we see more fear of disaster in the global economy, gold is going to struggle.”