Money flow into US commodity funds near 18-mth low -Lipper

Wed Dec 19, 2012 5:01pm EST

* November net inflow at $320 mln versus October's $2.4 bln

* Gold has gross inflow of over $1 bln, mostly in SPDR

* PIMCO fund for institutional investors bleeds most money

By Barani Krishnan

Dec 19 (Reuters) - The money that flowed into U.S. commodity products and funds in November was the smallest in 1-1/2 years and little improvement is expected before the year end as investors worry about a fiscal crisis, according to fund tracker Lipper.

For a fourth straight month, Lipper's fund flow data, which was released on Wednesday, showed that gold products and gold funds attracted the most money in commodities -- over $1 billion -- as investors saw the precious metal as a quickly saleable asset to cover losses elsewhere.

SPDR Gold Shares, the world's largest exchange-traded fund (ETF) for bullion, dominated the inflow into gold.

General commodity funds, that served big investors such as pension funds, bled money. U.S. bond manager Pimco's commodity fund for institutional investors had the largest outflow.

Lipper data showed a net inflow of just over $320 million in November for the 230-odd U.S. regulated commodity products and funds which it tracked -- down from $2.4 billion in October.

It was the smallest monthly inflow for the group since the net $21 million achieved in June 2011. It was also a fraction of the near $3 billion seen in November 2011, when a spike in gold-related investments again boosted money coming into commodities.

LITTLE ROOM FOR COMMODITY BULLS

Despite the staggering drop in November inflows, the 19-commodity Thomson Reuters-Jefferies CRB index settled the month up 1 percent, rising for the first time since September. The gains were largely due to a pick up in oil and copper prices from oversold conditions, traders said.

"There was little room really for commodity bulls to build meaningful positions last month," said Matthew Lemieux, a research analyst who helps compile the flow data for Lipper, a Thomson Reuters company.

"First, markets were riddled with uncertainty ahead of the U.S. presidential elections in early November; then the fiscal crisis came into focus," Lemieux said.

President Barack Obama, who won a second term in the elections, has been working to reach a deal with his Republican rivals to avert the so-called "fiscal cliff" -- which threatens the economy with crippling tax hikes and spending cuts unless an agreement is reached by Dec. 31.

Lemieux said Lipper's preliminary data for December showed another subdued month for commodities.

"We're seeing lower trading volumes across markets. For commodities specifically, I think investors are just taking a pause for the most part, waiting for the year to close out to see what's going to happen with policy-makers in Washington."

Progress in talks in avoiding a fiscal crisis appeared to stall on Wednesday as Obama accused Republicans of digging in their heels due to a personal grudge against him, while a Republican leader called the president "irrational."

GOLD INFLOWS RISE DESPITE PRICE FALLS

SPDR Gold Shares dominated Lipper's commodity inflows data for a fourth straight month, taking in almost $718 million, after the $1.4 billion in October, $1.74 billion in September and nearly $2 billion in August.

iShares Gold Trust had the second largest inflow, attracted nearly $352 million, versus $500 million in October and $610 million in September.

Despite the money piling into gold, the precious metal's price has fallen from this year's peaks as investors either took profits or liquidated to cover losses in other investments.

"Typically when you have significant down moves in other asset classes, gold will get sold off too because it can raise cash quickly," said Frank McGhee, chief precious metal trader at Integrated Brokerage Services in Chicago.

The spot price of gold, hovering just below $1,670 an ounce on Wednesday, is down 13 percent from a September high of $1,920. For the year, though, it is up nearly 7 percent.

Pimco's "Real Return Strategy Fund" for institutional investors accounted for the largest outflow in November -- just over $500 million.

Total net asset value for all the 230-odd U.S. commodity products and funds tracked by Lipper rose slightly to about $174.5 billion from October's level of around $172 billion.