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5 ETFs to Tap the Commodity Rally Amid Russia-Ukraine Conflict

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After logging the best year since the financial crisis, commodities continued their hot streak in 2022. Inflationary pressures along with the tensions between Moscow and Western countries over Ukraine have led to a spike in prices for a wide range of commodities. In fact, geopolitical tension has pushed commodity prices to levels not seen since the financial crisis (read: Russia-Ukraine Tensions Escalate: 3 ETFs to Buy).

The solid trend is likely to continue at least in the near term. While there are several ways to play the commodity surge, broad commodity ETFs like Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC - Free Report) , Invesco DB Commodity Index Tracking Fund (DBC - Free Report) , First Trust Global Tactical Commodity Strategy Fund (FTGC - Free Report) , iShares S&P GSCI Commodity-Indexed Trust (GSG - Free Report) and iPath Bloomberg Commodity Index Total Return ETN (DJP - Free Report) could be compelling choices to make the most of the bullishness in commodities across the board.

Solid Commodity Trends

Western countries like United States, Europe, the United Kingdom, Canada, Australia and Japan have slapped a slew of sanctions and restrictions on Russia in lieu of the attack on Ukraine. This could lead to supply disruption fears in an already-tight commodity market, resulting in shortages of food and energy.

Both Russia and Ukraine are among the world’s biggest producers of commodities, especially oil, gas, and metals, both base metals and specialty metals. Oil price spiked to near $120 per barrel while gas prices at the pump are heading toward $4 a gallon. Gold is easily hovering above $1900 per ounce on the metal’s safe-haven demand, while silver and platinum have also gained. Zinc reached its highest since 2007, aluminum surged to an all-time high and nickel raced to an 11-year peak (read: Here's How to Play Rising Energy Sector With Leveraged ETFs).

As Russia and Ukraine are the major producers of agricultural products, these commodity prices are on the rise as well. Wheat climbed to its highest levels in more than a decade while corn rose the highest level since May. Together, Russia and Ukraine account for one-third of the global wheat export market and Ukraine is the fourth-largest single-nation producer of corn.

ETFs To Play

Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC - Free Report)

Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF is an actively managed ETF that seeks to achieve its investment objective by investing in commodity-linked futures and other financial instruments that provide economic exposure to a diverse group of the world's most heavily traded commodities. The fund seeks to provide long-term capital appreciation using an investment strategy designed to exceed the performance of DBIQ Optimum Yield Diversified Commodity Index Excess Return, an index composed of futures contracts on 14 heavily traded commodities across the energy, precious metals, industrial metals and agriculture sectors.

Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF has AUM of $7.2 billion and trades in volume of around 4.7 million shares per day. The fund charges 59 bps in annual fees and has surged 23.5% so far this year.

Invesco DB Commodity Index Tracking Fund (DBC - Free Report)

Invesco DB Commodity Index Tracking Fund follows the DBIQ Optimum Yield Diversified Commodity Index Excess Return, which is composed of futures contracts on 14 of the most heavily traded and important physical commodities in the world (read: Commodity ETFs Rally Continues Amid Russia-Ukraine Conflict).

With AUM of $3.9 billion, Invesco DB Commodity Index Tracking Fund trades in volume of 4.7 million shares per day on average and charges 87 bps in annual fees. The product is up 23.4% so far this year.

First Trust Global Tactical Commodity Strategy Fund (FTGC - Free Report)

First Trust Global Tactical Commodity Strategy Fund is an actively managed ETF that seeks total return and a relatively stable risk profile while providing investors with commodity exposure. Agricultural futures account for 36.2% of the portfolio, followed by metal futures (31%) and energy futures (23.8%).

First Trust Global Tactical Commodity Strategy Fund has amassed $3.4 billion in its asset base and charges 95 bps in annual fees and expenses. Volume is good as it exchanges 1.6 million shares a day on average. FTGC is up 21.9% this year.

iShares S&P GSCI Commodity-Indexed Trust (GSG - Free Report)

iShares S&P GSCI Commodity-Indexed Trust offers exposure to a broad range of commodities in the energy, industrial and precious metals, agricultural, and livestock markets. It follows the S&P GSCI Total Return Index with energy making up for 62.5% while agriculture an industrial metals account for a double-digit allocation each.

iShares S&P GSCI Commodity-Indexed Trust has amassed $2.1 billion in its asset base and trades in a lower volume of about 3 million shares a day. It charges 75 bps in annual fees and has soared 35.5% this year.

iPath Bloomberg Commodity Index Total Return ETN (DJP - Free Report)

iPath Bloomberg Commodity Index Total Return ETN provides exposure to the Bloomberg Commodity Index Total Return. The benchmark reflects the returns that are potentially available through an unleveraged investment in futures contracts on physical commodities, comprising the Index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.

iPath Bloomberg Commodity Index Total Return ETN has been able to manage $1.2 billion in AUM and trades in a good volume of roughly 372,000 shares per day. The expense ratio comes in at 0.70%.