Commodity investments are heading for record outflows driven by withdrawals from gold exchange-traded funds as some investors lose faith in the traditional store of value, according to Barclays PLC.
Assets under management have declined $88 billion this year through last month, Barclays said in a report Tuesday. Net outflows reached $36.3 billion, also set for a record, it said. Investments in precious metals slid 40% since 2012 to $119 billion.
“If precious metals ETPs are excluded, the picture is a lot more positive,” Barclays analysts led by Kevin Norrish wrote in the report. “Nevertheless, we view 2014 as likely to be another difficult year for commodity investors as any clear and sustainable trends in prices will likely be few and far between.”
The Standard & Poor's GSCI gauge of 24 raw materials hs dropped 3.2% since the start of the year, headed for the worst year since the 43 percent drop in 2008. Fifty-two out of 67 commodity indexes tracked by Bloomberg are down this year supply surged and as markets for copper to corn tumbled into bear territory.
Gold and silver are headed for the worst year since 1981 as the Federal Reserve prepared to trim its stimulus program and investors lost faith in precious metals as a store of value. The Goldman Sachs Group Inc. called bullion a “slam-dunk” sell in October and said it was among the bank's most bearish commodity forecasts for next year.
Exchange-traded-product holdings backed by bullion slumped 31% this year to 1,802.46 metric tons, poised for the first outflow since the funds started trading in 2003. A further 311 tons will be withdrawn next year, a Bloomberg survey of 11 analyst estimates showed.
Excluding precious metals ETPs, commodity index swaps and ETPs had almost $4 billion of net inflows this year through November, setting index-linked investments on track for the first positive year in three, Barclays said.
China's economic growth will slow for a fourth year in 2014, the International Monetary Fund estimates. Next year's 7.25% expansion will be half of the 14.2% growth China's economy saw in 2007, the IMF forecasts.
Industrial metals will beat oil and precious metals in early 2014, according to the report.