It's been a rocky summer to be a commodities trader, but that could give investors looking to diversify away from stocks and bonds some long-term upside. More than halfway through the third quarter, many of the biggest commodity ETFs in the United States are in sizable holes. That applies to index-style funds like Invesco's Optimum Yield Diversified Commodity Strategy ETF (PDBC) as well as funds focused on single commodities, like the United States Oil Fund (USO) .
The slump in commodities could be a warning sign about slower economic growth . Notably, one of the exceptions among commodities has been gold , which is trading near record highs. The yellow metal is often seen as a defensive trade.
Additionally, the drawdown has come as the U.S. dollar, measured by the DXY index, is weakening — another hint that that global demand may be weak.
"The DXY index is down nearly -3% month to date and in our view, this is a harbinger for weak supply/demand fundamentals across the broader commodity complex," Ryan Grabinski of Strategas said in an Aug. 22 note to clients. However, signs of a big slowdown in demand for all commodities aren't evident just yet.
Kathy Kriskey, senior commodities ETF strategist at Invesco, said that oil supply is actually tight at the moment. The commodities slump could be partially due to mechanical factors in the market, such as low trading volumes combined with large commodity trading advisors betting against the sector, Kriskey said. "I know it sounds li.