With commodities indices hitting 13-year lows last week, now must be time to exit the asset class with both feet running, right?
Quite the contrary, says Barron's columnist Andrew Bary
. "It’s time to consider commodities," he writes.
"While the Standard & Poor’s 500, Nasdaq Composite, and other key equity indexes are near record levels, commodity stocks, including energy shares, are way below their peaks. Commodities are probably the most out-of-favor industry group in the stock market."
That's cat nip for value investors.
Indeed, "the commodities space represents great value versus the rest of the market,” Roland Morris, a commodity strategist and portfolio manager at Van Eck Global, tells Barron's. "There has been no place to hide--gold, industrial metals, and energy have all been weak."
Gold has dropped to a five-year low, trading at $1,102.70 an ounce Monday afternoon, and oil has slid to a four-month low, with U.S. crude trading at $44.90 a barrel.
Meanwhile, the S&P 500 index stood at 2,105 Monday afternoon, less than 2 percent beneath its record high.
Some investors clearly agree with Bary. The Bloomberg Commodity Index jumped 2.4 percent Monday, the most in six months.
As for gold, despite its 15 percent drop since Jan. 22, five nations accumulated more gold reserves in the first half of 2015.
Using data from the World Gold Council, the financial news web site 24/7 Wall St. calculated that China, Russia, Kazakhstan, Jordan and Mongolia took home some of the precious metal.
China snapped up 604 tons of gold in June alone and held 1,658 tons as of August, putting it at No. 5 among countries in the world.
It might seem surprising that China is spending money on gold while its economic growth slows, but remember that it has $3.7 trillion of currency reserves to put to work. And as 24/7 Wall St.'s John Ogg notes
, the government is trying to put a lid on borrowing. Spending government money on gold keeps that money out of China's financial system.
As for Russia, it likely bought gold to boost the sagging ruble, Ogg explains. The dollar has soared 75 percent against the ruble over the past year.
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