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Commodities Search for Strong End to Bad Year


It is perhaps of little compensation to investors that have been on the wrong side of the trade this year, but select commodities exchange traded funds are trying to end the year on a positive note.

The SPDR Gold Shares (GLD) , the world’s largest gold ETF, is up 1.6% in the past five trading sessions while the iShares Silver Trust (SLV) has jumped 4%. The gains are not limited to precious metals, either. Positive economic data has helped lift the U.S. Oil Fund (USO) by almost 2% over the past week. [More Pain Forecast for Gold]

“At this time the CRB index is attempting to push above falling resistance that has been a challenge for this index for the past few years,” notes Chris Kimble of Kimble Charting Solutions. “A breakout above resistance would be bullish for the CRB Index, which could impact several commodities in a positive way and has the potential to scare bond players too, per higher interest rates!”

The CRB Index is comprised of nearly 20 commodities, including coffee, corn, cotton, gold, natural gas, silver and wheat. The PowerShares DB Commodity Index Tracking Fund (DBC) is not linked to the CRB Index, but DBC does track “a rules-based index composed of futures contracts on 14 of the most heavily traded and important physical commodities in the world,” according to PowerShares.

DBC’s diversity across multiple commodities has helped the ETF at least be less bad than some single-commodity funds this year. A 7.2% loss confirms as much. DBC has gained 1.1% in the past five sessions. The fund is heavily tilted to petroleum-related contracts, though gold for April delivery represents 7.4% of DBC’s weight.

Some soft commodities have recently strengthened. For example, the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (JO) and the iPath Dow Jones-UBS Cotton Total Return Sub-Index ETN (BAL) are up 8.8% and 7.1%, respectively, in the past month indicating that those commodities are living up to strong seasonal trends . [Three C's of Commodities Enter Seasonal Sweetness]

PowerShares DB Commodity Index Tracking Fund

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD and SLV.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.