Investors are renewing their interest in commodities this year, after several years of sluggish prices.
The Dow Jones-UBS Commodity Index has advanced 9.7 percent so far in 2014, compared to a 1.5 percent gain for the S&P 500.
"We feel sentiment is turning," Pierre Andurand, managing partner of Andurand Capital, a hedge fund firm,
told the Financial Times. "Pension funds are coming to us and saying they want to invest in commodities while others aren’t looking."
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He said "smart investors" worried about potential declines in the stock market are turning to commodities.
Commodity index mutual funds and commodity exchange-traded funds have seen an inflow of almost $6 billion this year, after a record $50 billion of net redemptions in 2013, according to Citigroup.
Citi analysts say investors are using commodities as a means of diversification for the first time in many years, the FT reports. That's because the correlation between commodities, stocks and bonds has fallen substantially over the last year, after rising following the 2008 financial crisis.
As for gold, it slid to a 10-week low Thursday, after breaking technical support and amid concern that the yuan's weakness will force Chinese investors to sell gold they used for loans. Spot gold traded at $1,275.17 an ounce Thursday morning but rebounded to $1,295
by early Friday.
"The $1,277 support has been taken out," sparking selling, Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen,
told Bloomberg. "As we see the renminbi weaken, we see the risk that those financing deals could be closed and add to supply."
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