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Best Commodity ETFs of 2018 to Watch Again in 2019
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Like the other asset classes, commodities also saw feeble trading in 2018 with deep losses in everything from oil and copper to coffee and sugar. U.S.-China trade dispute, slowing growth in China and global slowdown concerns were the major culprits that are likely to persist this year as well. Additionally, strong dollar continued to weigh on commodities as a high dollar made dollar-denominated assets expensive for foreign investors, potentially diminishing demand for commodities. Notably, U.S. dollar index logged in its best annual rise in three years.
Crude oil and gasoline were the major losers while palladium and cocoa escaped the rout and continue to be bright spots. Palladium got a boost especially from strong demand as environmental concerns prompted a global shift from diesel to gasoline and hybrid vehicles. Additionally, supply shortages added to the strength. The bullish trend continued at the start of 2019 as palladium prices hit the key $1,300 level for the first time ever. Meanwhile, cocoa prices were on the rise on supply disruption as dry weather in top producing areas such as Ivory Coast hurt output (read: Palladium ETF Tops Gold in 2018: Will It Rally in 2019?).
Natural gas price spiked in November on colder-than-expected temperatures that led to higher heating demand after remaining flat for most of last year.
Coming to gold, the bullion registered the best monthly gain in December in two years as threats of global slowdown sparked demand for a safe haven. The yellow bullion acts as a store of value and hedge against market turmoil. Gold will likely see an uptick in 2019 given that the Fed will adopt a dovish stance and volatility persists. However, a booming U.S. economy and bouts of upbeat data will again steal the metal’s shine. Additionally, trade talks between the United States and China will add to the woes.
Given this, we have highlighted best performing commodity ETFs of 2018 that will remain in focus in 2019:
iPath Bloomberg Cocoa Subindex Total Return ETN
This note follows the Bloomberg Cocoa Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on cocoa. It has been able to manage $22.6 million in AUM and trades in a good volume of 51,000 shares per day. Expense ratio comes in at 0.70%. The note has surged 23% last year and carries a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: 4 ETF Gainers of 2018 That Can Keep Gaining in 1H19).
Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report)
PALL seeks to match the price of palladium. With AUM of $186.3 million, the ETF owns palladium bullion in plate or ingots kept in Zurich or London under the custody of JPMorgan Chase Bank. It has an expense ratio of 0.60% and sees lower volume of about 17,000 shares a day. The product was up 17.2% last year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
United States 12 Month Natural Gas Fund (UNL - Free Report)
This product seeks to offer spread-out exposure across the futures curve in order to mitigate contango, a huge problem in the natural gas ETF market. The investment objective of UNL is to reflect the daily changes in the price of natural gas delivered at the Henry Hub Louisiana. Its benchmark is the near month futures contract to expire and the contracts for the following 11 months, for a total of 12 consecutive months. If the near month futures contract is within two weeks of expiration, the benchmark will be the next month contract to expire and the contracts for following 11 consecutive months. UNL has accumulated $5.6 million in its asset base and charges 90 bps in annual fees. The product trades in paltry average daily volume of 8,000 shares and has gained 12.5% last year (read: 5 ETFs Up At Least 10% in Tumultuous Q4).
Though GLD has lost nearly 3% in 2018, it could see a reversal this year given the Fed’s dovish outlook. This fund tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $32.8 billion and average daily volume of around 7.8 million shares a day. Expense ratio comes in at 0.40%. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Follow Goldman With These Commodity ETFs).
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Best Commodity ETFs of 2018 to Watch Again in 2019
Like the other asset classes, commodities also saw feeble trading in 2018 with deep losses in everything from oil and copper to coffee and sugar. U.S.-China trade dispute, slowing growth in China and global slowdown concerns were the major culprits that are likely to persist this year as well. Additionally, strong dollar continued to weigh on commodities as a high dollar made dollar-denominated assets expensive for foreign investors, potentially diminishing demand for commodities. Notably, U.S. dollar index logged in its best annual rise in three years.
Crude oil and gasoline were the major losers while palladium and cocoa escaped the rout and continue to be bright spots. Palladium got a boost especially from strong demand as environmental concerns prompted a global shift from diesel to gasoline and hybrid vehicles. Additionally, supply shortages added to the strength. The bullish trend continued at the start of 2019 as palladium prices hit the key $1,300 level for the first time ever. Meanwhile, cocoa prices were on the rise on supply disruption as dry weather in top producing areas such as Ivory Coast hurt output (read: Palladium ETF Tops Gold in 2018: Will It Rally in 2019?).
Natural gas price spiked in November on colder-than-expected temperatures that led to higher heating demand after remaining flat for most of last year.
Coming to gold, the bullion registered the best monthly gain in December in two years as threats of global slowdown sparked demand for a safe haven. The yellow bullion acts as a store of value and hedge against market turmoil. Gold will likely see an uptick in 2019 given that the Fed will adopt a dovish stance and volatility persists. However, a booming U.S. economy and bouts of upbeat data will again steal the metal’s shine. Additionally, trade talks between the United States and China will add to the woes.
Given this, we have highlighted best performing commodity ETFs of 2018 that will remain in focus in 2019:
iPath Bloomberg Cocoa Subindex Total Return ETN
This note follows the Bloomberg Cocoa Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on cocoa. It has been able to manage $22.6 million in AUM and trades in a good volume of 51,000 shares per day. Expense ratio comes in at 0.70%. The note has surged 23% last year and carries a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: 4 ETF Gainers of 2018 That Can Keep Gaining in 1H19).
Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report)
PALL seeks to match the price of palladium. With AUM of $186.3 million, the ETF owns palladium bullion in plate or ingots kept in Zurich or London under the custody of JPMorgan Chase Bank. It has an expense ratio of 0.60% and sees lower volume of about 17,000 shares a day. The product was up 17.2% last year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
United States 12 Month Natural Gas Fund (UNL - Free Report)
This product seeks to offer spread-out exposure across the futures curve in order to mitigate contango, a huge problem in the natural gas ETF market. The investment objective of UNL is to reflect the daily changes in the price of natural gas delivered at the Henry Hub Louisiana. Its benchmark is the near month futures contract to expire and the contracts for the following 11 months, for a total of 12 consecutive months. If the near month futures contract is within two weeks of expiration, the benchmark will be the next month contract to expire and the contracts for following 11 consecutive months. UNL has accumulated $5.6 million in its asset base and charges 90 bps in annual fees. The product trades in paltry average daily volume of 8,000 shares and has gained 12.5% last year (read: 5 ETFs Up At Least 10% in Tumultuous Q4).
SPDR Gold Trust ETF (GLD - Free Report)
Though GLD has lost nearly 3% in 2018, it could see a reversal this year given the Fed’s dovish outlook. This fund tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $32.8 billion and average daily volume of around 7.8 million shares a day. Expense ratio comes in at 0.40%. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Follow Goldman With These Commodity ETFs).
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 >>