Back to top

Image: Bigstock

4 Best Commodity ETFs of 2020

Read MoreHide Full Article

After being hit badly by the coronavirus outbreak and the oil meltdown in March, broad commodities bounced off strongly thanks to massive liquidity injections by central banks across the globe and optimism over the vaccines.
    
The Fed has pledged to hold rates near zero and will continue the asset purchase program at the current rate until “substantial further progress” has been made toward reaching maximum employment and healthy inflation. Meanwhile, the vaccination will end the worst-ever pandemic, leading to a faster-than-expected recovery that will spur demand for raw materials from oil to copper. The combination of both the factors will also boost investment and spending in 2021.

Additionally, a weak dollar added to the strength as it makes dollar-denominated assets attractive for foreign investors, raising the appeal for commodities. The U.S. dollar registered the first annual drop since 2017 with the ICE U.S. Dollar Index dropping 6.7% (read: U.S. Dollar to Remain Weak in 2021? ETFs to Gain).

Precious metals like gold and silver were the star performers as COVID-19 cases continued to surge, raising the appeal for safe haven demand. The vaccinations have sparked reflation trade, thereby providing further support to these bullions. Both the bullions logged in their best annual performance in a decade. Meanwhile, palladium posted the fifth straight year of gains prompted by a global shift from diesel to gasoline and hybrid vehicles that led to higher demand for the metal and resulted in the speculation of supply deficit.
    
In the industrial metal space, copper was the outperformer, driven by recovering growth in the world’s second-biggest economy and improving manufacturing sector worldwide. Notably, China is the top consumer of raw materials (read: Bet Big on Industrial Metal ETFs on Vaccine Optimism).

Given this, we have highlighted four best-performing commodity ETFs of 2020 from these outperforming areas that will continue to trend higher if the favorable factors persist in the New Year too.

Aberdeen Standard Physical Silver Shares ETF (SIVR - Free Report) – Up 47.5%

This fund has AUM of $852.8 million and trades in moderate volume of around 577,000 shares per day on average. It tracks the performance of the price of silver less the Trust expenses. Expense ratio is 0.30%. SIVR has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) – Up 25.3%

The fund seeks to match the price of palladium. It owns palladium bullion in plate or ingots kept in Zurich or London under the custody of JPMorgan Chase Bank. The product has amassed $353.7 million in its asset base and trades in lower volume of about 25,000 shares a day. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: What Lies Ahead of the Decade-Best Commodity ETF Palladium?).

SPDR Gold MiniShares Trust (GLDM - Free Report) – Up 25.1%

This product seeks to reflect the performance of the price of gold bullion. Being a low-cost product with expense ratio of just 0.18%, GLDM has amassed about $4 billion in AUM and trades in a solid average daily volume of 2.7 million shares.

United States Copper Index Fund (CPER - Free Report) – Up 23.9%

This fund seeks to track the performance of the SummerHaven Copper Index Total Return, plus interest income from CPER’s holdings. The index provides investors exposure to front-month copper futures contract traded on the NYSE Arca. The product has accumulated $65.8 million in its asset base and charges 80 bps in annual fees. It trades in an average volume of 82,000 shares a day and has a Zacks ETF Rank #3 with a High risk outlook.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>