Commodity exchange traded funds are enjoying their best month since 2010 and are beating traditional equities and fixed-income assets to boot.
Over the past month, the PowerShares DB Commodity Index Tracking Fund (DBC) rose 7.8%, iPath Bloomberg Commodity Index Total Return ETN (DJP) increased 7.4% and iShares GSCI Commodity-Indexed Trust (GSG) gained 8.0%.
Both DBC and DJP are trading back above their long-term, 200-day simple moving averages while GSG is still trying to break through the resistance.
The Bloomberg Commodity Index, a measure of returns for 22 components, is at its highest since November after rising 8.1% in April, outperforming global equities and high-yield and investment-grade bonds, reports Marvin G. Perez for Bloomberg.
Leading the charge, oil experienced its biggest monthly gain in a year and gold advanced to a 15-month high.
The broad commodity ETFs also rallied on the strengthen in these two assets as the funds include heavy tilts toward energy and metals. For instance, DBC includes 9.5% gold, 11.4% heating oil, 9.8% light crude, 5.2% natural gas, 12.1% RBOB gasoline and 2.5% silver.
Trending on ETF Trends
DJP holds gold 12.6%, Brent crude 7.8%, WTI crude 7.4%, natural gas 6.6%, silver 4.4% and unleaded gasoline 4.2%.
GSG’s index target weights include WTI crude 24.5%, Brent crude 24.7%, gas oil 7.4%, heating oil 5.8%, RBOB gasoline 5.7%, natural gas 3.1%, gold 2.4% and silver 0.3%.
Supporting the commodities outlook, the China, the world’s top consumer of metals, grains and energy, is seeing its economy stabilize. On the supply side, U.S. crude oil production is faltering, which has helped support crude prices.
Moreover, the depreciating U.S. dollar has helped support demand for commodities as an alternative hard asset or a better store of wealth.
“China looks like it’s doing better because there’s stimulus coming through the pipeline,” Kevin Caron, a market strategist and portfolio manager for Stifel Nicolaus & Co., told Bloomberg. “At the same time, you got the Federal Reserve backing away from a more hawkish stance, which is allowing the dollar to soften, and that is always a good thing for commodities.”
Investors have also taken notice of the rising trend, piling in over $17 billion into exchange traded products that track commodities so far this year.
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PowerShares DB Commodity Index Tracking Fund