The Zhitong Finance app learned that traders are pouring into exchange-traded funds (ETFs) covering everything from oil to metals and grains. Investors are betting that although interest rates are expected to continue to rise, the global economy will avoid a painful recession.

According to data compiled by Bloomberg, more than $350 million was invested in 20 ETFs tracking a wide range of commodity indices in July. This is the second net capital inflow month this year. There was an outflow of funds over the previous four months.

Ryan Fitzmaurice, chief index trader at Marex Group Plc, said: “Due to concerns about the recession and declining inflation expectations, the past year has witnessed a massive flight of commodity index products. However, asset allocators have begun to re-invest in commodity index ETFs.”

The Bloomberg Commodity Spot Index, a measure of the value of global raw materials, rose 5.8% last month, the biggest increase since March 2022. The increase was driven by oil and derivatives, mainly driven by production cuts by major OPEC+ producers and improved macroeconomic prospects. Other commodities, such as copper, gold, cotton, and corn, also rose.

Despite this, the uncertain economic outlook still poses headwinds. When oil prices topped $80 per barrel, the oil fund recently saw its biggest weekly net outflow in more than a year.

According to J.P. Morgan's July 31 report, as of the end of July, the valuation of open positions in the global commodities market had reached a 13-month high of 1.31 trillion US dollars. The bank said that as of July 28, this figure in the energy market was 566 billion US dollars.

J.P. Morgan analysts, including Tracey Allen and Natasha Kaneva, wrote, “Our economists note that positive surprises about growth and inflation are fueling hopes for a 'soft land', and we continue to think commodities are an undervalued asset class.”