Understanding Commodity ETFs

Commodity exchange-traded funds (ETFs) are gaining prominence this year as investors seek exposure to precious metals, agriculture and hydrocarbons. Investors looking to diversify into primary markets should carefully consider this asset class for future growth. As the name implies, a commodity ETF is a fund that invests in physical commodities like natural resources, agriculture and metals. A fund can either be focused on a single commodity, i.e. gold, or in futures contracts. Some commodity ETFs track the performance of a commodity index that includes dozens of individual assets obtained by way of physical ownership or derivatives positions. Demand for commodity ETFs is growing as risk-off investors rotate into funds backed by gold and other precious metals. As the world’s oldest safe haven, gold provides protection against rising interest rates and broader market downturns. As equity markets continue to face volatility, commodities and the funds that track them are likely to see bigger uptake by investors and fund managers. To learn more about ETF Investing Strategies, click here .