Changing market conditions and newly implemented technologies could help drive demand for raw materials and support commodities-related ETFs.
“We’re at the tipping point for a new generation of commodities driven by intertwining technologies,” Maxwell Gold, director of investment strategy at ETF Securities, said in a note.
Specifically, Gold pointed to a rise new energy technologies such as in solar panel technology, which could drive silver demand, while nickel’s key role in lithium-ion batteries may drive prices higher. Meanwhile, automation and technology integration could help copper, a major component in electric vehicles, and the expansion of global autonomous and electric vehicles may see an uptick in copper consumption.
Global photovoltaic panel installations continue to beat expectations with global solar panel demand expected to exceed 100 gigawatts for 2017. China alone installed 34 gigawatts of solar in 2016 and over 17 gigawatts in the first half of 2017.
Consequently, the increased demand for solar panels may help support the silver market as silver is a key material for photovoltaic panels.
The rising demand for electric vehicles and other technologies has also helped support lithium-ion battery growth. The battery industry will also require many other metal components, including cobalt and nickel.
Commodities could also benefit from increased automation and technology integration. Copper, silver and gold are great conductors of electricity and used in many electronics and electrical components for vehicles. As future car fleets become more technologically dependent and autonomous with the development of self-driving cars, there will be an increase in demand for metal conductors across aggregate systems.
“As these themes and technologies continue to become central to future economic growth, focus and demand for the next generation of commodities at the heart of these advancements will likely move in tandem. This may provide investment opportunities by capturing new sources of demand for current commodities as well as from the next generation of commodities,” Gold said in a research note.
Investors who want to use precious metals as a short-term hedge and even a long-term play may consider a number of physically backed metals-related ETFs as a way to diversify a traditional stock and portfolio, including ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), ETFS Physical Silver Shares (NYSEArca: SIVR), ETFS Physical Platinum Shares (NYSEArca: PPLT) and ETFS Physical Palladium Shares (NYSEArca: PALL). ETF investors can also use the ETFS Physical Precious Metals Basket Shares (NYSEArca: GLTR) as a catch-all of all four precious metals.
Investors interested in diversifying their portfolios with other commodities exposure also have a number of ETF options available to them. ETF Securities came out with a line of ETFs to outperform the widely observed Bloomberg Commodity Indices without the need to worry about troublesome K-1 forms come tax season, including the actively managed ETFS Bloomberg All Commodity Strategy K-1 Free ETF (NYSEArca: BCI), ETFS Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (NYSEArca: BCD) and ETFS Bloomberg Energy Commodity Longer Dated Strategy K-1 Free ETF (NYSEArca: BEF).
For more information on the commodities, visit our commodities ETF category.