The Commodity Unwind Illustrated

Two charts that excellently illustrate the commodities bear market which has accelerated to record depths during the last few years:


  • Love them or hate them, precious metals exchange-traded products (ETFs, ETNs, etc.) soared to record levels in late 2012 following the ECB and Federal Reserve’s plunge into open-ended quantitative easing. More than $100 billion has fled precious metals ETPs since reaching their zenith in December 2012.



  • Managed money futures positioning in commodities is at its lowest net exposure in more than a decade as long positions in crude oil, gold, etc. continue to be unwound:





The takeaway from these charts is that there has been a tremendous exit from commodities markets in recent years; first it was via exchange traded products such as GLD and USO, and in the last year the unwind has spread to commodities futures. The damage has been done and it’s hard to envision how it can get worse given the extremely low levels of long positioning. If anything there is considerable potential for a portfolio rebalancing trade back into commodities