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After logging the best year since the financial crisis, commodities continue their hot streak in 2022, with the Bloomberg Commodity Spot Index, which tracks the price movements for 23 raw materials, surging 10.2% so far. Invesco DB Commodity Index Tracking Fund (DBC - Free Report) , which tracks a broad basket of the 14 most-heavily-traded commodity futures contracts, has risen 7.9% in the year-to-date time frame compared to a loss of 5.3% for the broad market fund (SPY - Free Report) .
While most of the commodities have been rising, these five ETFs — United States Natural Gas Fund (UNG - Free Report) , Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) , United States Gasoline ETF (UGA - Free Report) , United States Brent Oil Fund (BNO - Free Report) and iPath Bloomberg Cotton Subindex Total Return ETN — from different zones are leading the boom to start the year.
Prices for a wide range of commodities are skyrocketing as the world’s largest economies are recovering from the pandemic. With the wider spread of vaccinations, demand for raw materials has been rising in leaps and bounds amid supply chain disruptions, production issues and poor weather. Additionally, restrictions have been eased and the demand for air travel and cars has surged. Manufacturing and industrial activities are also picking up, leading to higher demand (read: 3 Commodity ETFs to Hedge Inflation Risk).
A weaker greenback also added to the strength as it makes dollar-denominated assets attractive for foreign investors, raising the appeal for commodities. Further, investors flocked to commodities on concerns over the rising inflation. This is because commodities are often viewed as a hedge against inflation and a weaker dollar.
Moreover, improving conditions in China, the world’s largest consumer of raw materials, has been driving commodity prices higher. The world’s second-largest economy grew 4% — faster than expected — in the fourth quarter, per the latest data from China’s National Bureau of Statistics. In 2021, the economy expanded 8.1% and reached the $18 trillion mark. Though full-year growth was below the market’s expectation for around 8.4%, it represents the fastest pace of growth since 2011 (read: China ETFs Set to Surge in 2022).
ETFs Taking the Charge
United States Natural Gas Fund (UNG - Free Report) – Up 36.9%
United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire.
Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) – Up 24.4%
Aberdeen Standard Physical Palladium Shares ETF seeks to match the price of palladium. It owns palladium bullion in plates or ingots kept in Zurich or London under the custody of JPMorgan Chase Bank.
Aberdeen Standard Physical Palladium Shares ETF has amassed $391.6 million in its asset base and trades in a lower volume of about 41,000 shares a day. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
United States Gasoline ETF is designed to track in percentage terms the movements of gasoline prices. The benchmark futures contract is the futures contract on gasoline as traded on the NYMEX. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire.
United States Gasoline ETF is illiquid with a daily trading volume of about 41,000, suggesting that investors have to pay extra beyond the annual fee of 0.60% per year. The fund has managed assets of $81.2 million.
United States Brent Oil Fund (BNO - Free Report) – Up 15.7%
United States Brent Oil Fund provides direct exposure to the spot price of Brent crude oil on a daily basis through futures contracts.
United States Brent Oil Fund has amassed $242.5 million in its asset base and charges 90 bps in annual fees and expenses. Volume is good as it exchanges 1.2 million shares a day on average (read: 3 Oil ETFs to Ride the Crude Rally).
iPath Bloomberg Cotton Subindex Total Return ETN – Up 13.2%
iPath Bloomberg Cotton Subindex Total Return ETN follows the Bloomberg Cotton Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on cotton.
iPath Bloomberg Cotton Subindex Total Return ETN has been able to manage $23.7 million in AUM and trades in a moderate volume of roughly 6,000 shares per day. The expense ratio comes in at 0.45%. BAL has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
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5 ETFs at the Heart of the Commodity Boom
After logging the best year since the financial crisis, commodities continue their hot streak in 2022, with the Bloomberg Commodity Spot Index, which tracks the price movements for 23 raw materials, surging 10.2% so far. Invesco DB Commodity Index Tracking Fund (DBC - Free Report) , which tracks a broad basket of the 14 most-heavily-traded commodity futures contracts, has risen 7.9% in the year-to-date time frame compared to a loss of 5.3% for the broad market fund (SPY - Free Report) .
While most of the commodities have been rising, these five ETFs — United States Natural Gas Fund (UNG - Free Report) , Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) , United States Gasoline ETF (UGA - Free Report) , United States Brent Oil Fund (BNO - Free Report) and iPath Bloomberg Cotton Subindex Total Return ETN — from different zones are leading the boom to start the year.
Prices for a wide range of commodities are skyrocketing as the world’s largest economies are recovering from the pandemic. With the wider spread of vaccinations, demand for raw materials has been rising in leaps and bounds amid supply chain disruptions, production issues and poor weather. Additionally, restrictions have been eased and the demand for air travel and cars has surged. Manufacturing and industrial activities are also picking up, leading to higher demand (read: 3 Commodity ETFs to Hedge Inflation Risk).
A weaker greenback also added to the strength as it makes dollar-denominated assets attractive for foreign investors, raising the appeal for commodities. Further, investors flocked to commodities on concerns over the rising inflation. This is because commodities are often viewed as a hedge against inflation and a weaker dollar.
Moreover, improving conditions in China, the world’s largest consumer of raw materials, has been driving commodity prices higher. The world’s second-largest economy grew 4% — faster than expected — in the fourth quarter, per the latest data from China’s National Bureau of Statistics. In 2021, the economy expanded 8.1% and reached the $18 trillion mark. Though full-year growth was below the market’s expectation for around 8.4%, it represents the fastest pace of growth since 2011 (read: China ETFs Set to Surge in 2022).
ETFs Taking the Charge
United States Natural Gas Fund (UNG - Free Report) – Up 36.9%
United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire.
United States Natural Gas Fund has AUM of $384 million and trades in volume of around 8.5 million shares per day. The fund has a 1.35% in expense ratio (read: Oil in Backwardation: 7 ETFs That Topped the Chart Last Week).
Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) – Up 24.4%
Aberdeen Standard Physical Palladium Shares ETF seeks to match the price of palladium. It owns palladium bullion in plates or ingots kept in Zurich or London under the custody of JPMorgan Chase Bank.
Aberdeen Standard Physical Palladium Shares ETF has amassed $391.6 million in its asset base and trades in a lower volume of about 41,000 shares a day. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
United States Gasoline ETF (UGA - Free Report) – Up 16%
United States Gasoline ETF is designed to track in percentage terms the movements of gasoline prices. The benchmark futures contract is the futures contract on gasoline as traded on the NYMEX. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire.
United States Gasoline ETF is illiquid with a daily trading volume of about 41,000, suggesting that investors have to pay extra beyond the annual fee of 0.60% per year. The fund has managed assets of $81.2 million.
United States Brent Oil Fund (BNO - Free Report) – Up 15.7%
United States Brent Oil Fund provides direct exposure to the spot price of Brent crude oil on a daily basis through futures contracts.
United States Brent Oil Fund has amassed $242.5 million in its asset base and charges 90 bps in annual fees and expenses. Volume is good as it exchanges 1.2 million shares a day on average (read: 3 Oil ETFs to Ride the Crude Rally).
iPath Bloomberg Cotton Subindex Total Return ETN – Up 13.2%
iPath Bloomberg Cotton Subindex Total Return ETN follows the Bloomberg Cotton Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on cotton.
iPath Bloomberg Cotton Subindex Total Return ETN has been able to manage $23.7 million in AUM and trades in a moderate volume of roughly 6,000 shares per day. The expense ratio comes in at 0.45%. BAL has a Zacks ETF Rank #3 (Hold) with a High risk outlook.