Armajaro Commodities fund was hurt by exposure in the energy markets in July, leading to a 1 percent drop in value on the month, according to an investor letter reviewed by ValueWalk. The fund is now down 1.37 percent year to date.

Armajaro: Oil prices lost ground due to ISIS

Oil prices lost ground in July due largely to the anticipated return of Libyan output and the stalling of ISIS’s advance across Iraq, as the energy complex has seen less volatility than some are anticipating given the potential for international conflict in the region.  Prices even found ballast even amidst ongoing political turmoil across the middle east that was blamed for hindering production, the report noted.

Overall, the report said that China’s stimulus and the US Fed’s dovish tone was fueling stock market gains, which occurred, oddly, while home prices were falling. It is the Fed’s dovish tone that is raising inflationary concerns, the report, dated July 2014, noted.

Increasingly fund managers are searching for an alternative market hedge to gold, a common risk buffer in a portfolio used to cushion the fall from inflation and other global concerns.  In this regard, while Gold has floundered recently, palladium continues in an uptrend making new highs. The metal started the year trading just above $725 and is now trading close to $900 per ounce. Contrast this to gold, which started the year near $1,225 and is currently trading near $1,275.

Commodoties Armajaro

Armajaro: Concerns for economic sanctions on Russia

The Armajaro investor letter noted growing concerns over trade sanctions in Russia and strong automotive demand in both China and the US as factors fueling the uptrend in palladium. The report noted that traditional hedges such as gold and silver posted negative gains in a market environment that, logically, would have provided those metals strength. Among the odd market environments that would normally drive up the price of gold, but has failed to do so, includes tension in Ukraine and Israel as well as the US Federal Reserve’s continued attempts to keep interest rates artificially low. The fund is significantly exposed to metals.

Metals are also being driven by an improving outlook in China and the US, as falling supply issues with Zinc and aluminum saw these metals rise nicely in price, along with Copper, which experienced falling inventories.

In the agricultural commodity complex, where the fund has a much lower exposure, the letter noted near perfect weather conditions in the corn growing region with higher than average crop yields anticipated.