5 Best Commodity ETFs of Q1

Broad commodities bounced back strongly after a weak fourth quarter driven by tightening supply and optimism over demand. Additionally, Fed’s dovish stance, which has kept U.S. dollar under pressure, added to the strength. A weak dollar makes dollar-denominated assets attractive for foreign investors, raising the appeal for commodities.

Further, the prospect of U.S.-China trade deal as well as stimulus in Chinese economy lent strong support amid global growth slowdown worries. Given the bullishness, the Bloomberg Commodity Index of 23 raw materials rose more than 6%, marking the best quarter in almost three years (read: Top ETF Stories of Q1).

In particular, oil price made a nice comeback on OPEC-led fresh crude output cuts and falling output from Iran and Venezuela due to U.S. sanctions. Industrial metals like nickel and copper also saw smooth trading, given the hopes of a trade deal as well as recovering growth in the world’s second biggest economy that will boost demand. Notably, China is the top consumer of raw materials. Further, falling stockpiles and the outlook for production deficits in some metals led to the rally in prices with an index of metals traded in London posting its first quarterly gain since the end of 2017.

In the precious metal space, palladium saw a strong run-up in its prices prompted by a global shift from diesel to gasoline and hybrid vehicles that has led to higher demand for the metal and resulted in the speculation of supply deficit. Gold often acts as a store of value and hedge against market turmoil amid still unresolved trade tensions, Brexit concerns as well as global slowdown worries. Coming to soft commodities, sugar has been leading the way higher with the global market swinging into deficit in the 2019-20 season. Additionally, reports of a drop in sugar output in India added to the strength.

Given this, we have highlighted five best-performing commodity ETFs of Q1 from these outperforming areas that will continue to trend higher if the favorable factors persist.

United States Oil Fund USO

This is the most popular and liquid ETF in the oil space with AUM of $1.5 billion and average daily volume of more than 28.4 million shares. The fund seeks to match the performance of the spot price of West Texas Intermediate (WTI or U.S. crude). The ETF has 0.76% in expense ratio and has gained more than 32% in the first quarter (read: Make the Most of the Oil Rush With These ETFs).

United States Gasoline ETF UGA

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 36,000, suggesting that investors have to pay extra beyond the annual fee of 75 bps per year. The fund has managed assets of $41.3 million and has gained nearly 29% in the first quarter.

iPath Bloomberg Nickel Subindex Total Return ETN JJN

The note tracks the he Bloomberg Nickel Subindex Total Return, which provides returns through one futures contract on nickel. The product is unpopular and illiquid with AUM of just $8.1 million and average daily volume of around 1,000 shares. Expense ratio came in at 0.75%. JJN has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Aberdeen Standard Physical Palladium Shares ETF PALL

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 $230.1 million in its asset base and trades in lower volume of about 33,000 shares a day. It charges 60 bps in annual fees and has gained about 13% last quarter. The fund has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (read: 4 Commodity ETFs to Tap at New Highs).

United States Copper Index Fund CPER

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 $230.1 million in its asset base and charges 80 bps in annual fees. It trades in light volume of 13,000 shares a day and has a Zacks ETF Rank #3 with a High risk outlook.

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iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN): ETF Research Reports
 
US Commodity Funds United States Gasoline Fund LP (UGA): ETF Research Reports
 
Aberdeen Standard Physical Palladium Shares ETF (PALL): ETF Research Reports
 
US Commodity Funds United States Oil Fund (USO): ETF Research Reports
 
US Commodity Funds United States Copper Index Fund (CPER): ETF Research Reports
 
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