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.”