Are Commodity ETFs Ready To Rebound Off Their Monthly Low?

June 1st at 11:30am by Tom Lydon

The month of May was not kind to commodities and related exchange traded funds (ETFs) as volatile markets sent investors to safe haven assets. Still, after a significant pullback in commodities, a buying opportunity may be around the corner if global markets return to some semblance of normalcy.

Deterred by the sovereign-debt crisis in Europe and speculation on a slowdown in growth as inflation in China rises, investors dumped commodities, reports Chanyaporn Chanjaroen for Bloomberg. The S&P’s GSCI Spot Index of 24 materials fell 6.8% in May, the largest monthly drop this year.

  • iShares GSCI Commodity-Indexed Trust Fund (NYSEArca: GSG) was down 6.9% the past month. The fund is hovering at its 50-day moving average after gains in recent weeks.  The ETF holds future contracts with 69% exposure in energy; 16% in agriculture; 7.6% in industrial metals; 4% in livestock and 3.3% in precious metals.

Silver led the fall in commodities, plunging 21%, the largest monthly drop since August 2008, followed by nickel and crude oil both declining around 10%.

“The May sell-off is a broad-based risk-averse move coming from a combination of concerns about Europe’s debt crisis, China’s inflation and U.S. data,” stated Andy Kaleel, CEO of Sydney-based H3 Global Advisors Pty Ltd.

Despite global optimism over the recent development in Greece’s financial outlook, the financial problem in the E.U. is not limited to Greece and the whole E.U. banking system needs to be reorganized, commented Laurence D. Fink, the CEO of BlackRock Inc. Fink also believes that restructuring will have to take place in Ireland and Portugal before the problems begin to go away.

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

iShares GSCI Commodity-Indexed Trust Fund

Max Chen contributed to this article.

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.

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