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Commodities are on track for the best annual performance since 2016. Though recession fears and escalation in trade dispute took a toll on the broad space for most of the year, renewed optimism as a result of the U.S.-China trade deal and a dovish Fed provided huge support to the space.
The Fed has slashed interest rates three times this year, which has kept U.S. dollar under pressure. A weak dollar makes dollar-denominated assets attractive for foreign investors, raising the appeal for commodities. The dual tailwinds of weak dollar and improving China economy led to strong demand for raw materials.
Precious metals like gold and silver have risen on investors’ drive to safety avenues, triggered by the broad market turmoil due to trade gyrations, collapse in bond yields, global recession fears, ongoing uncertainty surrounding Brexit and geopolitical tensions. Gold is on track for its best annual performance in nearly a decade. Meanwhile, palladium saw a strong run-up in prices 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 (read: Commodities Up for a Solid 2020? ETFs to Benefit).
In the industrial metal space, nickel and lead were the outperformers, driven by hopes of a trade deal as well as recovering growth in the world’s second biggest economy. Notably, China is the top consumer of raw materials. Severe supply curbs arising from Indonesia amid a surge in demand from electric vehicle benefited nickel the most. Coming to energy, oil price rallied on fresh OPEC output cuts, geopolitical tensions and U.S. sanctions on Iran and Venezuela.
Given this, we have highlighted four best-performing commodity ETFs of 2019 from these outperforming areas that will continue to trend higher if the favorable factors persist in the New Year too.
Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) – Up 51.9%
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 $300 million in its asset base and trades in lower volume of about 26,000 shares a day. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Palladium ETF Is Soaring, Will the Trend Continue in 2020?).
United States Gasoline ETF (UGA - Free Report) – Up 43.9%
This ETF provides investors with exposure to front-month gasoline futures, tracking RBOB gasoline for delivery to the New York harbor, which is traded on NYMEX. The ETF trades in average daily trading volume of about 14,000, suggesting that investors have to pay extra beyond the annual fee of 75 bps per year. The fund has managed assets of $30 million.
United States Brent Oil Fund (BNO - Free Report) – Up 37.5%
This fund provides direct exposure to the spot price of Brent crude oil on a daily basis through futures contracts. It has amassed $85.8 million in its asset base and charges 90 bps in annual fees and expenses. Volume is good as it exchanges 818,000 shares a day on average (read: Oil Rally in the Cards for 2020: ETF & Stock Picks).
iPath Bloomberg Nickel Subindex Total Return ETN – Up 35.7%
The note tracks the Bloomberg Nickel Subindex Total Return, which provides returns through one futures contract on nickel. The product is unpopular and illiquid with AUM of just $7.1 million and average daily volume of around 1,000 shares. Expense ratio came in at 0.75%. JJN has a Zacks ETF Rank #3 with a High risk outlook.
iPath S&P GSCI Crude Oil Total Return Index ETN – Up 33.5%
This is an ETN option for oil investors and delivers returns through an unleveraged investment in the WTI crude oil futures contract. The product follows the S&P GSCI Crude Oil Total Return Index, a subset of the S&P GSCI Commodity Index. The note has amassed $92.4 million in AUM and trades in a moderate volume of 75,000 shares a day. Its expense ratio is 0.75%.
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5 Top-Performing Commodity ETFs of 2019
Commodities are on track for the best annual performance since 2016. Though recession fears and escalation in trade dispute took a toll on the broad space for most of the year, renewed optimism as a result of the U.S.-China trade deal and a dovish Fed provided huge support to the space.
The Fed has slashed interest rates three times this year, which has kept U.S. dollar under pressure. A weak dollar makes dollar-denominated assets attractive for foreign investors, raising the appeal for commodities. The dual tailwinds of weak dollar and improving China economy led to strong demand for raw materials.
Precious metals like gold and silver have risen on investors’ drive to safety avenues, triggered by the broad market turmoil due to trade gyrations, collapse in bond yields, global recession fears, ongoing uncertainty surrounding Brexit and geopolitical tensions. Gold is on track for its best annual performance in nearly a decade. Meanwhile, palladium saw a strong run-up in prices 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 (read: Commodities Up for a Solid 2020? ETFs to Benefit).
In the industrial metal space, nickel and lead were the outperformers, driven by hopes of a trade deal as well as recovering growth in the world’s second biggest economy. Notably, China is the top consumer of raw materials. Severe supply curbs arising from Indonesia amid a surge in demand from electric vehicle benefited nickel the most. Coming to energy, oil price rallied on fresh OPEC output cuts, geopolitical tensions and U.S. sanctions on Iran and Venezuela.
Given this, we have highlighted four best-performing commodity ETFs of 2019 from these outperforming areas that will continue to trend higher if the favorable factors persist in the New Year too.
Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) – Up 51.9%
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 $300 million in its asset base and trades in lower volume of about 26,000 shares a day. It charges 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Palladium ETF Is Soaring, Will the Trend Continue in 2020?).
United States Gasoline ETF (UGA - Free Report) – Up 43.9%
This ETF provides investors with exposure to front-month gasoline futures, tracking RBOB gasoline for delivery to the New York harbor, which is traded on NYMEX. The ETF trades in average daily trading volume of about 14,000, suggesting that investors have to pay extra beyond the annual fee of 75 bps per year. The fund has managed assets of $30 million.
United States Brent Oil Fund (BNO - Free Report) – Up 37.5%
This fund provides direct exposure to the spot price of Brent crude oil on a daily basis through futures contracts. It has amassed $85.8 million in its asset base and charges 90 bps in annual fees and expenses. Volume is good as it exchanges 818,000 shares a day on average (read: Oil Rally in the Cards for 2020: ETF & Stock Picks).
iPath Bloomberg Nickel Subindex Total Return ETN – Up 35.7%
The note tracks the Bloomberg Nickel Subindex Total Return, which provides returns through one futures contract on nickel. The product is unpopular and illiquid with AUM of just $7.1 million and average daily volume of around 1,000 shares. Expense ratio came in at 0.75%. JJN has a Zacks ETF Rank #3 with a High risk outlook.
iPath S&P GSCI Crude Oil Total Return Index ETN – Up 33.5%
This is an ETN option for oil investors and delivers returns through an unleveraged investment in the WTI crude oil futures contract. The product follows the S&P GSCI Crude Oil Total Return Index, a subset of the S&P GSCI Commodity Index. The note has amassed $92.4 million in AUM and trades in a moderate volume of 75,000 shares a day. Its expense ratio is 0.75%.
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 >>