This week, investment research firm Morningstar issued its most recent Fund Flows Update report.  The results are interesting in that overall mutual fund and exchange-traded fund asset inflows (the money put into funds buy investors) in September were a lot less than the outflows (money taken out of funds by investors).  According to the report, long-term mutual funds saw inflows of $14.3 billion during the month, while U.S. equity outflows continued reached $16.3 billion.  This, as the report notes, was despite the best-performing September for stocks in 71 years.

Digging through the data in the Morningstar report, we find a growing divergence between the money flow in international-stock funds and domestic-equity funds. International-stock funds saw what can be described as modest inflows of $600 million in the third quarter; however, U.S. stock funds saw outflows of approximately $42.7 billion in the same period.

The report goes on to say that investors have pulled $80.9 billion from U.S. stock funds over the trailing 12 months, while adding nearly $34.3 billion to international-stock funds.  That’s a difference of $115.2 billion. On the ETF front, we had inflows of roughly $25.4 billion in September.  Year-to-date ETF inflows are now $64.9 billion.

One segment of the market that everyone knows is hot right now is commodities, and particularly precious metals.  Gold seems to hit record highs on a daily basis, and it seems as though practically the entire investing public has come down with an acute case of gold fever. 

According to Morningstar, commodity funds in general have taken in nearly $7.5 billion so far in 2010. The data also shows a shift taking place away from broad-basket commodity funds and into equity precious-metals funds. Inflows into equity precious-metals funds came in at $692 million in September, handily besting inflows of $654 million for broad-basket commodity funds.  As the rocket ship that is precious metals prices continues to soar, look for more fund inflows into this fund category.

Now, if you’re looking to play the precious metals boom with mutual funds, you have many different options.  Many of the big fund families — Franklin, Oppenheimer, Van Eck, etc. — have precious metals funds to choose from.  Some of the best performing funds year-to-date are the Van Eck International Investors Gold A (INIVX), which boasts a 2010 total return of 3.61% (through 10/11/10); the Oppenheimer Gold & Special Minerals-A (OPGSX), with a 37.24% year-to-date return; the Franklin Gold & Precious Metals Adv (FGADX); and the Tocqueville Gold Fund (TGLDX), with a sector-leading year-to-date performance of 40.91%.

Each of these precious-metals funds represents some of the biggest winners in the space so far this year.  In fact, these funds are among the best recent performers in what Morningstar says has been the best-performing mutual fund category of the last decade.  If you want to follow the trends, you need to follow the fund flows — and that means following the flow into precious metals.