Monthly commodities update

Invesco monthly commodities update

Key drivers of commodity returns

Returns for broad commodities were slightly negative in June, mainly due to falling prices across grains and industrial metals, while a small pullback in precious metals prices also held back performance. Overall, the Bloomberg Commodity Index returned -1.5% for the month but is still up 5.1% at the halfway point of 2024.

Longer term histories for oil and gold

The gold price was little changed over the month, closing at $2,327. However, there were intra month price swings with a strong US employment report driving prices lower before lower inflation data, and its implications for monetary policy, allowed prices to rise once more. However, gold struggled to make further progress following news that China hadn’t added to their gold reserves in May, the first pause since last November. For a deeper dive into the performance of gold, please see our monthly gold article.

Oil prices rallied in June, mainly due to ongoing geopolitical tensions, but remain within the trading range of the last few months.

  • Energy

    Oil prices fell early in the month following the OPEC+ meeting. Although production cuts were extended until the end of Q3, the 2.2m barrels per day of voluntary cuts may start to be gradually brought back which was seized on by energy bears. But energy prices rallied later in the month due to increasing geopolitical tensions in the Middle East and the Russia-Ukraine conflict. Natural gas was the outlier in the energy complex with slightly negative returns for the month. This was due to some profit-taking following the strong performance since the start of quarter into early June and some concerns that the market is oversupplied even with the expected hotter weather and higher anticipated air conditioning usage. 

  • Precious metals

    While gold ended the month slightly down, silver was the worst performing previous metal. This is in keeping with its perception of being a leverage play on gold as ETPs suffered large outflow on profit-taking following the strong rally into June end. Macro factors were the main drivers for gold over the month with prices falling following the strong employment report before rallying back on lower-than-expected inflation data. However, while the drop in the gold price attracted some inflows, gains were limited following news that China hadn’t added to its gold reserves in May for the first time since last November.

  • Industrial metals

    Industrial metals performed poorly in June. Initially, this was driven by some profit-taking, mixed economic data and hawkish Fed commentary. However, rising inventories in Shanghai raised concerns about both the Chinese economy and demand for the metal following the recent rise in prices. Although Shanghai inventories did turn lower during the month, they started to rise in London which kept pressure on prices.

  • Grains, softs & livestock

    Agricultural commodities had mixed fortunes in June with volatility in grains rising due to weather risks. However, wheat prices came under pressure from better-than-expected harvest progress in the US while corn prices fell in anticipation of a strong crop. Although there was some positive news with regards to Brazil’s sugar production during the month, prices remained supported by short covering amid bullish forecasts with an anticipated deficit for the year.

  • Commodity ETP Flows

    Commodity ETPs had a second consecutive positive month with NNA of $0.9bn. Gold was the strongest category with net inflows of $1.4bn as buyers returned following a pullback from the all-time price highs seen in May. But it’s worth noting that the gold price remains higher than levels at which sales were seen at earlier in the year, potentially signalling that gold is expected to trade in a higher price range in coming months. Silver (-$0.5bn) experienced the strongest outflows as profits were taken following the strong rally into the end of May. Flows across other commodity categories were muted.

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security, or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

    Data source Invesco/ Bloomberg as at 28 June 2024 unless otherwise stated

    Views and opinions are based on current market conditions and are subject to change.

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