Commodity Fund Outflows Reach Weekly Record of $4.23 Billion

Money managers removed a record $4.23 billion from commodity funds in the week ended Feb. 27, led by declines in precious-metal holdings, as raw materials capped the biggest monthly loss since October.

Investors pulled an all-time high of $4.03 billion from gold and precious-metals funds, said Cameron Brandt, the director of research for EPFR Global, which started tracking the flows in 2000. The Cambridge, Massachusetts-based researcher said last week that total commodity outflows for the period ended Feb. 20 reached $828 million.

The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 4 percent last month, the most since October, amid concern that the Federal Reserve will ease stimulus measures, and as the dollar posted its biggest monthly gain since May. Money managers are holding the smallest commodity net-long position, or bets on a rally, since March 2009, government data show.

“You’ve had a series of things that have been negative for commodities, like a stronger dollar and concerns that stimulus would end,” said Adrian Day, who manages about $160 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland. “At the same time, the stock market is doing well, so a lot of people are saying let’s jump on a train that’s moving in the right direction.”

Commodity Slump

The S&P GSCI dropped 2.4 percent this week in New York, the fourth straight decline and the the longest losing streak since June. The MSCI All-Country World Index of equities was little changed, while the dollar rose 1 percent against a basket of six trading partners. Treasuries returned 0.4 percent, a Bank of America Corp. index shows.

Wheat, nickel and silver tumbled more than 8 percent in February. All but two of the 24 raw materials tracked by the S&P GSCI declined on prospects for increased supply and concern that growth will slow in China, the world’s biggest consumer of everything from copper to cotton.

The official Chinese Purchasing Managers’ Index was 50.1 in February, the weakest in five months and down from 50.4 in January, a report from the National Bureau of Statistics and China Federation of Logistics and Purchasing showed today in Beijing. A separate gauge from HSBC Holdings Plc and Markit Economics dropped to a four-month low of 50.4 from 52.3. Readings above 50 indicate expansion.

China Outlook

“Some of the numbers out of China, they’re kind of a bit spotty,” John Kinsey, who helps manage about C$1 billion ($973.5 million) at Caldwell Investment Management Ltd. in Toronto, said in a telephone interview. “People tend to be nervous there. You look at the commodity prices, and they tend to react to the Chinese economic numbers.”

Wheat fell below $7 a bushel on Feb. 26 for the first time since June as snowstorms promised relief to drought-stricken U.S. winter crops. Futures for May delivery on the Chicago Board of Trade rose 0.2 percent this week to close at $7.205, after declining 8.3 percent in February.

Oil dropped 2.6 percent to $90.68 a barrel this week on the New York Mercantile Exchange. U.S. crude production rose to 7.12 million barrels a day in the week ended Feb. 15, the highest since August 1992, a Feb. 21 Energy Information Administration report showed.

Gold futures fell to $1,572.30 an ounce on the Comex in New York, the lowest settlement since July 18. The metal, down less than 0.1 percent this week, has dropped 6.2 percent in 2013. It was the fourth straight weekly decline.

Goldman Sachs Group Inc. said the cycle for bullion has probably turned after rallying for its 12th straight year in 2012. The bank cut its three-month target to $1,615 from $1,825 in a Feb. 25 report.

“We see a general situation where people are cutting some of their losses in commodities,” Michael Strauss, who helps oversee about $25 billion of assets as chief investment strategist at Commonfund Group in Wilton, Connecticut, said in a telephone interview.

Before it's here, it's on the Bloomberg Terminal.