ETF Trends
ETF Trends

While a global economic crisis diverted interest away from the commodity markets and related exchange traded funds (ETFs), new signs are emerging that investors are on the hunt for more adventurous trading straegies when it comes to the sector.
The upswing that was expected within the commodity sector has been tempered in recent months, however, the interest is still ripe for investment, and strategy has simply shifted. According to Sue Thomas for Reuters on The Guardian, the proof of investor interest is in the flows of new money into commodities in the first quarter, which had been estimated at record levels. What’s going on?

  • Cheaper markets provided buying opportunities after massive deleveraging last year
  • ETFs are allowing investors easier access – the highest level of commodity investment was seen in the ETF market, which allows investors to buy a share in raw materials in a similar way to acquiring an equity stake in companies
  • As investors become a bit more brave, they have broadened their exposure rather than zeroing in on one
  • The trend within passive investment is changing, as the buy-and-hold strategy is gaining a skeptical eye. The trend has been geared more toward broad investment exposure which puts the positioning in place for a recovery later in the year

Daniel Wills, an ETF specialist with ETF Securities, says that most recently, he has seen a pick-up in investment into industrial-related precious metals such as platinum and palladium.

  • iShares GSCI Commodity Indexed Trust (GSG): down 4.5% year-to-date

  • PowerShares DB Commodity Index Tracking Fund (DBC): up 0.4% year-to-date

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.