Sunday Spectacle XCI

Commodity Fund Flows - Physical Commodities vs Synthetic

(source: "Sold on Pork Bellies (and Other Commodities)" by Tim Gray for The New York Times. Published: October 9, 2010)


I find this chart really fascinating. Long-time readers may know that I'm bearish on commodities and I have always wondered if the commodity complex set a multi-decade peak in 2008. If so, I would expect flows into commodities to be weak. Yet, based on the charts above, it looks like way more money is flowing into physical commodities than ever.

I also find it interesting that investors are putting more money into physical commodities than derivatives. Anyone that has tried investing in commodities knows that it is far easier to buy securities tied to some commodity index than one that owns the actual commodity itself. I wonder how much of the chart is influenced by gold. Gold has been on a major tear and I suspect a lot of the increase is due to hedge funds buying physical gold.

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