Commodity
exchange traded funds (ETFs) and exchange traded notes (ETNs) have come
a long way since Nov. 18, 2004. That’s when the first single-commodity
ETF – streetTRACKS Gold Shares (GLD) – was launched.

Of the 30 or so physical commodities traded in the United States, 12
of them trade with a huge amount of volume. There are three ways to
access commodities through an ETF or ETN:

1) A broad, diversified basket replicating an index such as the GSCI

2) A basket of futures that track commodities from the same area, such as agriculture

3) Single commodity ETFs and ETNs

When you think single commodities, obvious ones like gold, wheat and
oil come to mind. That was the thinking at Victoria Bay Asset
Management when the United States Oil (USO) was launched in April 2006.

Victoria Bay Asset Management Chief Investment Officer John
Hyland says you wouldn’t want to bring out a fund on a commodity that
hardly trades at all. "The way sponsors approached it was they either
went for the basket, or went for the major commodities first."

U.S. Oil was followed by United States Natural Gas (UNG) in April 2007, United States Gasoline (UGA) this February and United States Heating Oil (UHN) last month.

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