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December is a Bad Month for Commodity ETFs


This has been a bad year for commodities-related exchange traded funds, with hard assets heading for their first annual lose since 2008, and it could get worse if historical December trends pan out.

Since 1971, the Standard & Poor’s GSCI Spot Index of 24 raw materials has declined in December about 83% of time when the benchmark showed a loss for the year through November, reports Elizabeth Campbell for Bloomberg.

On average, the December decline was 3.9%. The S&P GSCI Index is down 3.7% year-to-date.

Commodities have declined in December 55% of the time since 1971, with average returns of 0.1%. In the years the GSCI showed negative returns over the first 11 months, December losses were magnified.

“It’s likely that the trend will hold through the end of the year,” Michael Cuggino, a manager at Permanent Portfolio Family of Funds Inc., said in the article. “Investors see anemic or slowing economic growth in the world’s mature and emerging-market economies, while there’s more supply on hand. That translates to lower prices.”

So far this year, 15 commodities are moving toward an annual loss, with corn declining 40%, its largest annual plunge since data began in 1960, gold moving toward its first annual dip in 13 years and silver set to experience its worst turn in three decades. [Glum Technical News for Gold ETFs]

Looking ahead, Jeffrey Currie, Goldman Sachs Group Inc.’s head of commodities research, expects “significant” declines in iron ore, gold, soybeans and copper next year. Currie points to raw materials diverging from equities after an extended period of rising prices is overshadowed by rising supply.

Some broad commodity ETFs include:

  • PowerShares DB Commodity Index Tracking Fund (DBC) : down 8.2% year-to-date
  • iPath Dow Jones-UBS Commodity Index Total Return ETN (DJP) : down 12.2% year-to-date
  • iShares GSCI Commodity-Indexed Trust (GSG) : down 3.6% year-to-date
  • ELEMENTS Linked to the Rogers International Commodity Index – Total Return (RJI) : down 6.5% year-to-date
  • United States Commodity Index Fund (USCI) : down 4.7% year-to-date
  • GreenHaven Continuous Commodity Index Fund (GCC) : down 10.5% year-to-date

For more information on commodities, visit our commodity ETFs category.