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Best Commodity ETFs of Q3

Sweta Killa

The performance of broad commodities in the third quarter has been mixed. While slowing global growth concerns and escalation in trade dispute took a toll on the demand for commodities, tightening supply and hopes of a deal led to gains in the space. Notably, the Fed rate cuts, which have 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.

Precious metals like gold and silver have been riding higher 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. Meanwhile, platinum and 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.

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, attacks on Saudi Arabia’s oil production facilities, which disrupted supply, led to the biggest oil price rally ever (read: Saudi Attack Threatens Oil Supply: Energy ETFs Set to Soar).

Given this, we have highlighted four best-performing commodity ETFs of Q3 from these outperforming areas that will continue to trend higher if the favorable factors persist.

iPath Bloomberg Nickel Subindex Total Return ETN JJN – Up 36.8%

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 $8.8 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 (read: Nickel ETF Soars: What's the Driving Force?).

ETRACS CMCI Silver Total Return ETN USV – Up 18.2%

The note is designed to track the performance of the UBS Bloomberg CMCI Silver Total Return, less investor fees. It is unpopular and illiquid with AUM of just $2.3 million and average daily volume of about 100 shares. USV charges 40 bps in annual fees (read: Why Silver ETFs are Outshining Gold).

Aberdeen Standard Physical Platinum Shares ETF PPLT – Up 11.6%

The fund seeks to match the price of platinum. It has amassed $730.9 million in its asset base and trades in lower volume of about 103,000 shares a day. The fund charges 60 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook

iPath Bloomberg Lead Subindex Total Return ETN LD – Up 10.5%

This note tracks the Bloomberg Lead Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on lead. It has accumulated $0.5 million in its asset base while trading in volume of under 1,000 shares a day on average. LD charges 70 bps in fees per year and has a Zacks ETF Rank #3 with a High risk outlook.

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Aberdeen Standard Physical Platinum Shares ETF (PPLT): ETF Research Reports
 
iPath Bloomberg Lead Subindex Total Return ETN (LD): ETF Research Reports
 
iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN): ETF Research Reports
 
UBS ETRACS CMCI Silver Total Return ETN (USV): ETF Research Reports
 
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