Consider the large outflows in the commodity complex which occurred over the last two months. Barclays Capital Commodity Investor Newsletter wrote in July that:
The mixed picture is typified by the $3.9bn Q2 net outflow of institutional and retail investments funds from commodities, the largest quarterly outflow since Q3 2005. The bulk of that is attributable to commodity indices, which saw withdrawals of $5bn in Q2. In contrast, the more flexible structured products sector saw issuance of $3.5bn, the highest for three years, while precious metals ETPs reversed their negative trends of Q1 with $0.4bn of fresh inflows.
I think the about outflows have actually been very bullish for commodities from the contrarian point of view. Those following my blog should have noted already, that I was calling for a bottom in the overall commodities complex back on 24th of June in a post entitled Time To Step Into Commodities Including Wheat. Back than I wrote:
For me, I prefer Rogers International Commodity Index, which is a basket of all commodities including Crude Oil, Brent Oil, Wheat, Corn, Soybeans, Rice, Cotton, Coffee, Sugar, Cocoa, Copper, Aluminium, Gold, Silver and many others. I believe that the best way to play the secular commodity bull market is to accumulate the index like this one, when majority are bearish and panic selling. Therefore, as of last night I have opened up substantial amount of RJI shares.
Personally, I added to my overall position of commodities on 24th of June, two days before an intermediate bottom at around $9.00. I believed back than and still believe today that the overall commodities complex is in a secular bull market, which still has several years to go due to extremely powerful growth in Asian demand and neglected global supply. The most important key to executing this bull market is to try and buy low. Remember, commodities will not go up in a straight line, so there will be corrections, consolidations and even panic sell offs, like the one we have seen in Silver over the last few months. But when they do happen, step up when all others are selling and buy some more.