Advisors and investors that feel they are hearing more and more about commodities and the corresponding exchange traded products in recent months are right. That is a natural result of dollar weakness and yes, the greenback is floundering again in 2018.
After shedding more than 9% in 2017, the Deutsche Bank Long USD Currency Portfolio Index is off 1.79% to start 2018. That index, which measures dollar strength (or weakness) against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, would need to gain 10.67% to reclaim its 52-week high (as of Feb. 7).
Given commodities’ historically inverse relationship with the dollar, it probably is not surprising that the S&P GSCI Index is up 10.95% for the 12-month period ended Feb. 7. The performance of that widely followed index serves as a reminder of the advantages of using a basket approach to commodities. Sure, exchange traded funds (ETFs) have made it easier for investors to isolate single commodities, such as gold, oil and silver. But for many investors, identifying when an individual commodity will outperform is a tricky endeavor.
The United States Commodity Index Fund (USCI) brings the basket to end users. USCI follows the SummerHaven Dynamic Commodity Index Total Return, a widely followed gauge of of 14 commodity futures. That benchmark’s selection universe consists of 27 commodity futures and, each month, the selections are whittled down to 14.
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