Investors can utilize exchange traded funds to target specific commodity opportunities as the commodities market begins to show greater divergence among its various components.
Over the past three months, the broader commodities market has been turning around. For instance, the PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC) rose 2.3% and iShares GSCI Commodity-Indexed Trust (NYSEArca: GSG) increased 4.2%.
Nevertheless, investors can also target specific commodities to capture changes in fundamentals of the underlying market. For example, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained 8.7% over the past three months and the iPath Dow Jones UBS Agriculture Sub-Index ETN (NYSEArca: JJA) rose 5.8%.
Agricultural or grains-related commodities have also recently been outperforming, with JJA up 11.5% over the past month. Leading the charge in the soft commodities space, the Teucrium Corn Fund (NYSEArca: CORN) was 13.9% higher and Teucrium Wheat Fund (NYSEArca: WEAT) advanced 14.8 over the past month.
Meanwhile, other areas like industrials metals have been weaker. Over the past three months, he PowerShares DB Base Metals Fund (NYSEArca: DBB), which tries to evenly split its portfolio with aluminum, copper and zinc futures, declined 3.8% and the iPath Dow Jones UBS Industrial Metals Total Return Sub-Index Total Return ETN (NYSEArca: JJM) fell 5.2%.
“It has been a mixed bag for the asset class as a whole,” Aakash Doshi, analyst at Citigroup, said in a Financial Times article.
The diverging performance among commodities could continue to persist through the rest of the year as fundamental factors show a greater effect on prices. For instance, oil prices could remain capped, with a supply glut hanging over the market.