Total commodity investor assets under management have been on the rise throughout April and May, according to analysis from RBC, a trend that investors should keep an eye on. The bank's research reveals significant net notional inflows of $6.7 billion and $5.7 billion in April and May, respectively, driven primarily by metals on a price basis.
Metals Sector Driving Commodity Investor Assets Under Management
The majority of the net notional inflows were attributed to the metals sector, with mixed to neutral underlying flows over the two-month period. The bank's analysis suggests that this trend may be indicative of a shift in momentum for commodity investors. With around 86% of precious metals assets under management (AUM) backed by gold, the price performance of this metal often dictates overall notional moves in AUM in this sector.
Gold Holdings on the Rise
For most of the past year, underlying gold holdings had been on a secular decline. RBC's analysis suggests that investors were attempting to hold the notional value of their gold holdings flat as prices rallied to new highs. However, this necessitated selling to maintain the desired notional value. The bank's research reveals that while this is a departure from the longer-running relationship between price and flows in the gold space, the mostly range-bound pricing in May saw outflows slow and potentially bottom.
Potential Bottoming of Gold Holdings
RBC notes that with prices more challenged at the bottom of May's range thus far in June, there has been a slight uptick in gold holdings. This trend is seen as supportive to AUM data in the space and is something to watch closely. The bank believes that if this holds, it could be indicative of a stabilizing or even increasing trend for commodity investor assets under management.
Stabilization of Commodity Investor Assets Under Management
RBC suggests that AUM could stabilize further in 2024, especially if precious metals flows turn sustainably positive. The key appears to be in the metals sector, with gold's price performance often dictating overall notional moves in AUM in this sector. If the trend of increasing gold holdings continues, it may signal a shift towards more positive underlying flows for commodity investors.
Potential Long-Term Implications
The implications of this trend on long-term market dynamics are unclear. However, RBC's analysis suggests that a stabilizing or increasing trend for commodity investor assets under management could have significant consequences for the broader market. If this trend continues, it may indicate a shift in investor sentiment and a potential increase in demand for commodities.
Conclusion
The continued rise of commodity investor assets under management is a trend that investors should closely monitor. With around 86% of precious metals AUM backed by gold, the price performance of this metal often dictates overall notional moves in AUM in this sector. If the trend of increasing gold holdings continues, it may signal a shift towards more positive underlying flows for commodity investors and potentially stabilize or even increase commodity investor assets under management.
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