Some investors may be easing back into commodities and related exchange traded funds as a strengthening global economy, a slowing U.S. dollar and fall off in prices are enticing some bottom fishers.
Over the past month, the PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC) added 3.8%, iPath Dow Jones-UBS Commodity Index Total Return ETN (NYSEArca: DJP) gained 2.2% and iShares GSCI Commodity-Indexed Trust (NYSEArca: GSG) increased 7.3%.
The rebounding oil prices are lifting the broad asset class, along with the recovering copper, sugar, gold and other raw materials, reports Ira Iosebashvili for the Wall Street Journal.
Over the past month, the United States Oil Fund (NYSEArca: USO) jumped 21.1%, iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEArca: SGG) was up 1.2% and SPDR Gold Shares (NYSEArca: GLD) was 1.0% higher. [Crude Oil ETF Breaking Out]
Energy commodities make up the largest portion in broad commodity ETFs. For instance, DBC includes 12.4% Brent crude, 12.4% heating oil, 12.4% light crude, 5.5% natural gas and 12.4% RBOB gasoline. DJP holds Brent crude 8.5%, natural gas 8.3%, WTI crude 8.2%, unleaded gasoline 5.2% and heating oil 4.3%.
Some institutional investors see an opportunity in commodities after the steep sell-off in the asset class over the past year, with many picking up raw materials at prices near multiyear lows.
“People are finding comfort that Europe is stimulating, that U.S. growth is being maintained,” George Zivic, a manager for Oppenheimer Commodity Strategy Total Return fund, said in the WSJ article. “If you are a value commodity investor, I do believe there are opportunities here.”
For instance, oil has been among the most popular plays. According to the U.S. Commodity Futures Trading Commission, net bets on higher oil prices rose 9% to 231,556 contracts for the week ended April 14.
Additionally, money managers are turning bullish on copper after the metal hit a 23 week low. The iPath Bloomberg Subindex Total Return ETN (NYSEArca: JJC) has dipped 4.0% year-to-date and fell 12.0% over the past year. [Dr. Copper Could get Heathy This Year]
Looking ahead, observers argue that a global recovery fueled by strong growth in the U.S. and a rebound in the Euerozone, along with a pause in the U.S. dollar’s ascent, could help commodities.
iShares GSCI Commodity-Indexed Trust
For more information on the commodities market, visit our commodity ETFs category.
Max Chen contributed to this article.