Commodity ETFs Pull in Most Cash Since 2022 on Sticky Inflation

Alex Longley, Bloomberg News

, Source: Bloomberg

(Bloomberg) -- Investors are putting the most money into broad-based commodity ETFs in more than two years, on bets that sticky inflation is signaling continued robust demand for raw materials.

The 20 largest exchange-traded products that invest in a basket of commodities have pulled in about $970 million so far this month, the most since March 2022, according to data compiled by Bloomberg. They collectively have assets of more than $20 billion.

Cash has been flowing back to commodities as inflation data across Western economies continue to come in at a higher-than-expected level, while economic growth figures generally improve. While that could mean interest rates will stay high, commodity bulls argue it’s a sign of strong underlying consumption that ultimately means the sector will benefit.

Traders are likely “adding some commodities into their portfolios, both to catch some of the inflation with a real asset as well as trying to ride along on some acceleration in manufacturing,” said Bjarne Schieldrop, chief commodities analyst at SEB AB.

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The inflows contrast with the five largest gold ETFs, which are on track for a collective outflow of $1.8 billion this month, despite higher prices, the data show. Bullion hit a record in April even with the timeline for US rate cuts being pushed back, with the rally linked to central-bank buying, robust purchases from Asia and demand for a haven.

Most of the broad-based commodity products indexes like the Bloomberg Commodity Index or the S&P GSCI, which replicate a basket of raw materials. They don’t include ones that hold individual assets.