BARCLAYS: 2016 could end up being the best year ever for commodities funds

This year, which started with a rout in Chinese stocks and oil prices, may well end up being the best ever for managers of commodities funds.

Investment flows of $3.2 billion (£2.4 billion) in last month mean that January-August inflows stand at $54 billion — an all-time high for the first eight months of any year, according to a report by Barclays.

2009 set the record for the best full-year for investment inflows with $71 billion, but that “target is now clearly in sight” for 2016.

“At $54bn, inflows so far in 2016 are now ahead of the previous best ever year in 2009,” Barclays analyst Kevin Norrish said in a note to clients on Thursday.

“It would need a huge collapse over the remainder of this year for investment flows to turn negative on an annual basis, so it now looks highly probable that 2016 will mark the end of three consecutive years of net withdrawals from commodity investments,” he said.

Gold is the most popular investment this year, on its own accounting for half of the total investment flow into commodities, according to Barclays.

“Uncertainty about the financial sector and global growth and rising political risks seems likely to support continued flows into the sector,” the report said.

Here is gold’s rise in the eight months to August this year:

It is an impressive turn-around for a sector that has been on a roller coaster ride. 2015 was a disaster for commodities, led by China’s stock market volatility and the prospect of central bank interest rate rises.

Here is the chart, courtesy of Bank of America Merrill Lynch of how the year started:

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