Government and central-bank efforts to boost the global expansion may be coming too late amid signs commodity demand is already being curbed, said John Stephenson, who helps manage C$2.7 billion ($2.6 billion) at First Asset Investment Management Inc. in Toronto.
Manufacturing, which makes up about 75 percent of total production in the U.S., dropped 0.4 percent last month, and output at factories, mines and utilities fell 0.1 percent, a Fed report showed June 15. More Americans than forecast applied for unemployment insurance payments in the week ended June 9, another sign that the labor market is struggling, according to government data June 14.
Greece’s largest pro-bailout parties, New Democracy and Pasok, won enough seats to forge a parliamentary majority, easing concern that the country was headed toward an imminent exit from the euro. Last month’s elections failed to produce a government, increasing investors’ concern the 17-nation euro would fracture.
“The risk is overwhelming to the downside in terms of commodity markets,” Stephenson said. “It’s a terrible macroeconomic backdrop because you’re looking at the very real problem of contagion through the euro zone.”
Investors added $376 million to commodity funds in the week ended June 13, according to data from Cambridge, Massachusetts- based EPFR Global, which tracks money flows. That’s the biggest inflow since the last week of February, said Cameron Brandt, the director of research for EPFR. Gold and precious-metals funds took in $747 million, he said.
“People are scared, and most of the policy solutions to the things that are scaring them involve more quantitative easing by central banks, which basically means pumping out more paper currency,” Brandt said. Those are “two good reasons to get some assets into gold,” he said.
Long positions on higher bullion prices rose for a third week, the longest increase since February. Net-long positions climbed 1.3 percent to 99,684 contracts, the highest since May 1, CFTC data show. Bets on higher silver prices gained 12 percent to 7,312 futures and options, a six-week high.
Gold rose 3.9 percent this year, extending 11 annual gains. Investors are buying the metal as a hedge against inflation, speculating that global stimulus measures will devalue currencies and increase consumer costs.
The net-long position in oil fell for a sixth consecutive week as the Organization of Petroleum Exporting Countries pledged June 14 to maintain production targets even after prices plunged. Crude has tumbled to $83.88 a barrel in New York, from as much as $110.55 in March.
A measure of 11 U.S. farm goods showed speculators raised bullish bets in agricultural commodities by 21 percent to 378,963 contracts, the first increase in three weeks. Investors almost doubled bullish bets on hogs and increased their net-long position in soybeans by 19 percent, the CFTC data show.
“We’re probably in the later stages of the commodity correction,” said John Bailey, the founder and chief executive officer of Stamford, Connecticut-based Spruce Private Investors LLC, which advises clients on $3 billion of assets. “We’re looking for a policy-led rebound in the second half.”