In a banner year for financial assets, commodity ETFs’ performance was just ‘okay’. The WisdomTree Enhanced Commodity Strategy Fund (GCC)the year’s best-performing broad commodities ETF, rose 17.5% in the year to December 11.
Meanwhile, the largest ETF in the broad commodity category is worth $4.3 billion Invesco Optimum Yield Diversified Commodity ETF (PDBC)rose by only 2% in that period.
Weakness in key commodities such as crude oil, natural gas, wheat and soybeans has weighed on the group as a whole.
On the other hand, the robust performance of precious metals such as gold has been a tailwind for the group, offsetting losses in other commodities.
Such variable performance is typical of commodity markets. Outside of periods of major economic shifts, individual commodities tend to do their own thing.
This year, weak demand growth has weighed on oil prices, while strong demand for gold from central banks has pushed up prices of the yellow metal.
Indeed, many of this year’s best-performing commodity ETFs are gold ETFs. Most gold funds, including the SPDR Gold Trust (GLD)rose between 31% and 32% in the period this year to December 11.
The only group of commodity ETFs that outperform (excluding leveraged and inverse ETFs) are silver funds.
The iShares Silver Trust (SLV) is up just over 33% so far this year.
However, unlike gold, which is at an all-time high of $31/oz, silver is still far from its all-time high of around $50.
Outside of precious metals, ETFs linked to base metals have also performed quite well. The Invesco DB Base Metals Fund (DBB) is up 11.5% this year, while the United States Copper Index Fund (CPER) has increased by 10.2%.
Interestingly enough, the United States Oil Fund (USO) and the Brent Oil Fund (BNO) of the United States are up 10% and 8% respectively, even though the oil price has fallen this year.
Futures contracts for both oil benchmarks are in backwardation this year, boosting returns for ETFs that roll their positions from one contact to another.
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