The commodity ETFs track a basket of futures contracts. Futures contracts with a longer expiration date have a higher price, compared to the spot price. As a contract moves closer to the expiration date, the futures price needs to converge with the spot price. If longer-dated contracts are more expensive, the futures market is said to be in a state of “contango.” In a contangoed market, the ETF loses money each time it rolls contracts to a costlier later-dated contract. [Backwardation and Contango]
iPath S&P GSCI Total Return Index ETN
For more information on commodities, visit our commodity ETFs.
Max Chen contributed to this article.