Big inflows earlier in the year turned into big outflows in July, as oil and gold prices sputter.

Commodity ETFs were hit by record outflows in July with investors withdrawing $11.5bn from these funds globally, according to data from Morningstar Direct.

This was the most money ever withdrawn from commodity ETFs in a calendar month since 2008, when Morningstar Direct began collecting such data. The previous record was $9.36bn in April 2013.  

July’s outflows followed redemptions in May ($4.9bn) and June ($4.5bn), but despite these withdrawals, commodity ETFs, globally, have taken in a net $8.4bn so far this year as investors bought into the energy rally at the start of the year. 

The earlier inflows and more recent outflows roughly match the fortunes of the price of oil. The front-month contract for West Texas Intermediate crude began the year at less than $80 per barrel, spiked to nearly $125 in early March after Russia invaded Ukraine, and has dropped from around $120 at the start of June to less than $100 at the end of July.

The reversal in oil price is reflected in stock performance. The S&P 1500 Energy index gained nearly 53% for the year through June 14, but has lost more than 7% from June 15 through August 15.

Global inflation has also spiked this year, and commodity prices are usually sensitive to inflation. But, more recently in the US, there has been hope that the main inflation indicator, the consumer price index, has peaked after rising 8.5% on a year-over-year basis in July.

Reversal of fortune

Source: Morningstar Direct / Data to July 31

As the oil price has fallen and the outlook for inflation has softened, so ETF investors have fled commodity funds. 

Commodity categories accounted for four out of five of the least popular ETF peer groups in July. Funds in the Morningstar Commodities Focused category suffered the most outflows of any Morningstar peer group for the month of July, shedding $4.7bn.

Funds in the Ultrashort Bond category lost the second-most assets, $3.2bn, in July, and were followed by Commodities – Broad Basket, Natural Resources, and Commodities – Precious Metals, which shed $3.1bn, $2.2bn, and $2.2bn, respectively for July. (Natural Resource is not strictly defined as a Commodity category by Morningstar but has been included in the chart above to further illustrate investor behavior in July).

Gold has suffered a similar fate to oil, spiking in US dollar terms earlier in the year, but faltering from the early spring through the summer. From the start of the year through April, gold gained 4.9% in dollar terms, but from May through July, it lost 8.3%.

All of the commodity categories have had net inflows for the year except for Commodities Broad Basket, which has suffered $1.5bn in outflows.

The bulk of the July outflows — $5.9bn out of the $11.5bn exiting  global commodity funds — came from US-listed funds.

At a fund level, three precious metals ETFs suffured the heaviest outflows. The SPDR Gold Shares ETF (GLD) lost the most assets with just under $2bn in outflows. The fund had the fourth most outflows among all US ETFs for the month. 

The iShares Physical Gold ETF was second worst, shedding $1.9m, and the iShares Silver Trust (SLV) had the third most outflows losing nearly $1.1bn.

Finally, though classified as an equity sector fund and not contributing to the record outflows from commodity ETFs, the iShares US Energy ETF (IYE) gave back $655m. That would have placed it fifth for most outflows on the global commodity funds list.