Commodity Investments Drop the Most in 11 Months as Gold Tumbles

Commodity investments fell $27 billion in April, the most in 11 months, on record sales of gold exchange-traded products, Barclays Plc said.

Assets under management dropped to $385 billion from $412 billion in March, the biggest decline since May 2012, London-based Barclays said in a report e-mailed today. Net redemptions in gold were a record 182 metric tons worth $8.7 billion in April followed by another 99 tons in May, it said.

The Standard & Poor’s GSCI Total Return Index of 24 raw materials fell 4.7 percent in April, the biggest drop since May 2012. The gauge is down 3.1 percent this year. Gold tumbled into a bear market during the month as some investors lost faith in the metal as a store of value.

“The relatively poor performance of commodity assets means that some institutions that had planned allocations to commodities are delaying their entry,” Suki Cooper, an analyst at Barclays, said in the report. “We expect inflows to commodity index investments to remain subdued for now but for flows to improve modestly later this year, especially if commodity investment outcomes improve relative to other assets.”

Commodity-related ETP assets declined 11 percent to $174 billion and index investments fell 4.5 percent to $128 billion. Gold prices dropped 18 percent this year to $1,378.26 an ounce after falling to a two-year low on April 16.

Gold Rebound

There is a risk of “modest rebound” in gold prices over the next month, Cooper said. Concerns that the U.S. Federal Reserve will scale back stimulus are premature, she said.

Investors should sell copper if it goes above $7,500 a metric ton as the economy in China, the world’s largest buyer of the metal, is growing slower than anticipated, according to the report. Platinum is favored because of limited supplies and investor demand, Barclays said.

“A mild recovery in gold prices in the weeks ahead seems possible,” Cooper said. “With fundamentals in palladium and platinum among the strongest across the whole commodity spectrum, the precious metals sector could turn out to be one of the better performers over the rest of the second quarter.”

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