Investors Are Still Hungry for Commodities

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Includes: MOO, USO
by: Market Blog

By David Berman

It doesn’t look as though investors have lost their appetite for commodities, despite the volatility of the past couple of weeks – and that might help to explain why key commodities made an impressive comeback on Thursday afternoon.

Crude oil had been down as low as $95.25 a barrel on Thursday, marking a three-month low and bringing the total decline since late April to about 16 per cent. It then rebounded to $98 a barrel, down just 21 cents. Other commodities made similar 180s.

Why? A report from Bloomberg News suggests that commodity-based exchange traded funds have been drawing large investor interest over the past week. More specifically, the U.S. Oil Fund ETF (NYSEARCA:USO), which tracks the spot price of West Texas Intermediate light oil, attracted more than $514-million, according to research firm XTF Inc.

Similarly, the Market Vectors Agribusiness ETF (NYSEARCA:MOO), which tracks 46 agriculture-related companies, attracted about $500-million over the past week.

Bloomberg quoted Nicholas Colas, chief market strategist at BNY ConvergEx Group: Investors “are not yet willing to give up on the weak dollar and inflation trade,” he said. “They are cycling into agriculture and energy-oriented investments, even though the price action is choppy.”

Disclosure: None