U.S. Markets closed

October: A Bad Month for Commodity ETFs?

This article was originally published on ETFTrends.com.

The recent strength in commodity ETFs may not last as the asset class may be heading toward a seasonally weak period of the year.

Over the past month, the Invesco DB Commodity Index Tracking Fund (DBC) , the largest broad commodity-related ETF, gained 3.4% and the iShares S&P GSCI Commodity-Indexed Trust (NYSEARCA: GSG) rose 3.8%.

However, the good times may not last. According to Dow Jones Market Data going back to 1990, October has historically been the worst month for gold, silver and Brent crude, and the month has been the second worst for U.S. crude and copper, along with being the only month when gold, silver and copper posted losses on average, the Wall Street Journal reports.

Metals have not experienced a particularly good year either. Year-to-date, the SPDR Gold Shares (NYSEArca: GLD) fell 8.8% and iShares Silver Trust (NYSEArca: SLV) declined 14.1% so far this year. Meanwhile, the iPath Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJCB) fell 5.7% over the past three months.

Trade Concerns & Commodities

Copper and silver have been hit by trade concerns as investors grew increasingly wary of the potential risks to industrial metals demand in face of rising trade barriers. Meanwhile, gold has lost its luster on expectations for higher interest rates since non-yielding hard assets become less appealing when rates rise.

Crude oil, on the other hand, has been rallying this year, with the United States Oil Fund (USO) up 29.2% and the United States Brent Oil Fund (BNO) 28.8% higher year-to-date.

Related: Oil ETFs Strengthen on Deeper U.S. Inventory Drawdowns

Brent and West Texas Intermediate crude oil prices have surged this year on tighter supplies, but there were some hiccups due to the heightened uncertainty surrounding the trade war between the U.S. and China, along with signs of weakness in the broader emerging markets.

“The trade fight is the main aspect the markets will look at,” Edward Meir, a consultant at broker-dealer INTL FCStone, told the WSJ. “If there’s pressure, it will come from that side of it.”

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