While deflationary pressures have dulled the luster for the precious metals and mining stocks crowd this year, flows into certain commodity-based exchange-traded funds continue to grow despite the uncertain global environment.
“In the last few weeks, we’ve really seen an increase towards commodity ETFs,” Todd Rosenbluth, head of research at VettaFi, told CNBC. Seema Fashion on “ETF Edge” on Monday.
Rosenbluth said interest in precious metals commodity ETFs increased earlier in May compared to the previous month, according to VettaFi data.
“The story is all about gold,” Will Rhind, founder and CEO of GraniteShares, said in the same segment on Monday. “[It’s] the only major metal to remain firmly in the green for the year.”
Rhind said the increase is largely due to debt ceiling negotiations and potential defaults. The ongoing banking crisis is still looming, higher inflation and a falling dollar are also tailwinds for the precious metal, he said.
“Gold is really serving its purpose at the moment as a way for people to park money in an uncorrelated asset because they’re worried about what might happen,” Rhind said. “Definitely, [to] to hedge against the likelihood of something falling out of bed with the debt ceiling.”
It flows into SPDR Gold Shares they topped $1.14 billion in the past month, according to FactSet. The iShares Gold Trust (IAU) and SPDR Gold MiniShares Trust (GLDM) saw net inflows of $182 million and $222 million in the same time period.
But with a potential deal on the debt ceiling coming as early as this week, Rosenbluth suggested expanding exposure to precious metals and mining.
“Gold may not be in favor forever,” Rosenbluth said. “We are also finding that advisors are interested in active management within the commodity space Neuberger Berman Commodity Strategy ETF (NBCM) is another way to get diversified exposure to commodities.”