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 like a bit of a lame excuse for why this quarter so far has been challenging, but I do think a lot of is on very small news items — the positioning is very short. I think it will improve,” she added. Corn and wheat Agricultural commodities are one area where a story of slowing demand doesn’t appear to be the cause of the decline. Sal Gilbertie, CEO of ag-focused investment firm Teucrium, said the price of agricultural products is just now shaking off the disruption from Russia’s invasion of Ukraine more than two years ago. “The price of corn has taken almost three full years from those 2022 spike highs to get back down. We’re finally back at the cost of production,” said Sal Gilbertie. Corn typically leads the price of wheat and soybeans lower, he added. Teucrium’s ETFs tracking those three commodities have fallen in the third quarter. CORN 5Y mountain The Teucrium Corn ETF is now trading below its level from before Russia’s invasion of Ukraine in 2022. The cost of production is a key level for agricultural products because farmers are subsidized, Gilbertie says. Once a price hits that level, the upside should outweigh the downside in the future for prices of corn and related ag products, but it is not clear when the next move will come. “When you see corn between $3.50 and $4 [a bushel], it just trades sideways until something happens,” Gilbertie said. What’s next The slump in commodities comes at a time when global central banks are starting to pivot toward looser monetary policy. Data from Invesco shows that commodity indexes have rallied after the start of some rate cutting cycles in the past — particularly in the mid-1990s. If easier interest rates flow through the economy, that can stir demand from consumers and companies, which in turn can drive the price of oil and copper higher. Commodities rallied on Friday after Fed Chair Jerome Powell said “the time has come for policy to adjust .” “When we are in an easing cycle, commodities tend to do well,” Kriskey said. To be sure, Fed rate cuts don’t always fix weak demand. Goldman Sachs economists still predict a 20% chance the U.S. economy falls into a recession in the next 12 months. And oil, one of the biggest weights in commodity indexes, could see stepped up supply in coming months. “Crude oil markets remain in deficit, but are likely as tight as they will be for some time. By 4Q, the balance will likely return to equilibrium, and we estimate a surplus in 2025,” Morgan Stanley commodities strategist Matijn Rats said in an Aug. 22 note to clients. Rats also lowered his global demand forecast for oil, citing economic issues in China. Put it all together, and investors may need to be willing to wait for a commodities rebound. That could make long-term plays like metals related to batteries and the electric grid a smart allocation. One way to play that theme could be Invesco DB Base Metals Fund (DBB) , which holds futures on copper, zinc and aluminum in roughly equal value. Note, however, that the Invesco fund issues K-1 tax form due to its partnership structure, which can be complicated. “I like the industrial metals at these levels, but I think it’s a long-term hold, because of the energy transition,” said Kriskey. — CNBC’s Michael Bloom contributed reporting.