Despite scrutiny by the as the Commodity Futures Trading Commission (CFTC), which was investigating possible causes of the wild volatility and surge in oil and gas prices last year, commodity exchange traded funds (ETFs) continue to grow in number and assets.
One of the most well-known commodity ETF providers, U.S. Commodity Funds, especially felt the wrath of the CFTC when two of their commonly traded funds, United States Natural Gas (NYSEArca: UNG) and United States Oil (NYSEArca: USO) came under the microscope. The primary reason these funds were looked at was concern that the growing popularity of futures-backed commodity ETFs were causing the volatility in oil and gas prices, leading to a huge surge in prices last year, states Max Frumes of Medill Reports. (How to play commodity ETFs).
After overcoming CFTC regulators, the ETF provider has further expanded its offerings by introducing the United States Brent Oil Fund LP, whose prospectus was filed Sept. 18, and the already-approved United States 12 Month Natural Gas Fund LP.
The two new funds offered by U.S. Commodity Funds are the United States Brent Oil Fund LP, whose prospectus was filed Sept. 18, and the already-approved United States 12 Month Natural Gas Fund LP.
The reason behind this expansion is simply that commodity ETFs have enormous appeal:
- ETFs have simplified commodities investing for the average Joe. Now you don’t have to be a financial giant to capitalize on commodity trends.
- As the U.S. economy still continues to show signs of weakness, inflationary concerns loom over investors’ heads. Commodities are one way to hedge rising prices. (Other ways to hedge against inflation).
- The supply vs. demand picture is favorable. Emerging markets continue to develop and prosper. As they continue to do so, demand for commodities will increase. This could potentially lead to higher prices.
- The U.S. dollar is weak right now. This makes commodities priced in dollars cheaper for overseas investors. (Why commodities could go higher).
For more stories on commodities ETFs, visit our commodities category.
Kevin Grewal 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.