Commodity ETFs higher as macroeconomic conditions improve

Mar 13th, 2012 | By | Category: Commodities

Commodities were higher in February, with many commodities supported by positive macroeconomic data, according to a report from Credit Suisse. The Dow Jones-UBS Commodity Index Total Return was up by 2.70% in February.  Overall, 14 out of 20 index constituents increased in value.

Commodity markets higher as macroeconomic conditions improve

Energy was the best performing sector, up 4.87% for the month. Petroleum led the sector higher due to improved economic sentiment and increasing political tension in the Middle East.

Energy was the best performing sector, up 4.87% for the month. Petroleum led the sector higher due to improved economic sentiment and increasing political tension in the Middle East, further constricting excess production capacity.  Colder weather in Europe helped to counter what had thus far been a warm winter, increasing petroleum demand.

Agriculture increased, up 3.53%.  While Sugar and Soybeans were the best performers in the sector, Corn was also supported by strong weekly USDA export sales data.  Livestock ended the month up a relatively modest 0.81%, led higher by Cattle.  Tight inventory levels have constrained supply, despite higher wholesale beef prices.

Industrial Metals also increased slightly, up 0.79%, with mixed performance among constituents.  Aluminium and Copper posted strong gains, while Nickel was sharply lower.  Aluminium delivered the greatest individual return as smelters are dealing with continually increasing energy costs.

Precious Metals were relatively unchanged, down 0.35%.  Gold had a strong month, supported by continued accommodative monetary policies globally.  However, speculation that a stronger-than-expected US economy might alter the Federal Reserve’s policies supported a stronger US dollar and had an outsized impact on Gold.”


iShares S&P GSCI Dynamic Roll
Commodity Swap ETF

– Tracks the S&P GSCI Dynamic Roll Capped
Commodity 35/20 Index, providing broad
commodity market exposure

– ‘Dynamic roll’ feature helps mitigate the impact
of contango on performance

– Over-collateralised swap-based replication via
multiple counterparties substantially reduces
counterparty risk

– UCITS compliant, London listed, UK Reporting
Status sought, eligible for ISAs and SIPPs

– TER of just 0.45%, considerably less than
traditional actively managed commodity funds

Nelson Louie, Global Head of Commodities in Credit Suisse’s Asset Management division, said: “Commodities were generally supported by an improved macroeconomic environment in February.  The economic data released towards the end of the month highlighted continued gradual improvement in global growth momentum, which is supportive of future commodity demand.

“Commodity markets remain susceptible to global supply shocks, especially in the case of petroleum.  Global oil supply and demand balances are significantly tighter than most had anticipated due to rising Middle East tensions and tighter sanctions, production disappointments, labour strikes and production shutdowns.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: “While the economy is improving, we believe the US Central Bank will be in no hurry to raise rates and possibly choke the budding recovery.  With inflation expectations remaining well anchored, the odds of inflation overshooting expectations remain elevated.

“Commodities have historically tended to outperform during periods of higher than expected inflation.  We believe investors will continue to benefit from the inflation protection and diversification potential of holding diversified commodities exposure within a portfolio of traditional assets.”

For investors looking to gain exposure to commodity markets, there is a growing list physical ETCs, equity ETFs and swap-based futures ETFs to choose from. Following is a selection of products covering key sectors (London listed, except where stated):

Broad Commodity

LGIM Commodity Composite Source ETF (LGCU)
iShares S&P GSCI Dynamic Roll Commodity Swap ETF (SDYC)
ETFS GBX Daily Hedged All Commodities DJ-UBS PD (PALL)


iShares S&P Commodity Producers Oil and Gas ETF (SPOG)
iShares S&P GSCI Dynamic Roll Energy Swap ETF (SDRE)
ETFS Natural Gas £ ETC (NGSP)
ETFS Brent 1yr ETC (OSB1)

Agriculture & Livestock

iShares S&P Commodity Producers Agribusiness ETF (SPAG)
Lyxor S&P GSCI Agriculture & Livestock 3 Month Forward ETF (AGLG)
Lyxor S&P GSCI Inverse Agriculture & Livestock 1 Month Forward ETF (AGSG)
iShares S&P GSCI Dynamic Roll Agriculture Swap ETF (SDRA)
ETFS Agriculture £ DJ-UBSCI ETC (AGAP)
ETFS Forward Livestock DJ-UBSCI-F3 ETC (FLIV)

Industrial Metals

Lyxor S&P GSCI Industrial Metals 3 Month Forward ETF (MELG)
Lyxor S&P GSCI Inverse Industrial Metals 1 Month Forward ETF (MESG)
iShares S&P GSCI Dynamic Roll Industrial Metals Swap ETF (SDRM)

Precious Metals

iShares S&P Commodity Producers Gold ETF (SPGP)
iShares Physical Gold ETC (SGLN)
Source Physical Gold ETC (SGLD)
DB-X Physical Gold ETC (XGLD)
ETFS Physical Gold ETP (PHAU)
iShares Physical Silver ETC (SSLN)
DB-X Physical Silver ETC (XSIL)
Source Physical Silver P-ETC (SSLV)
ETFS Physical Silver ETP (PHAG)
ETFS Precious Metals DJ-UBSCI ETC (AIGP)
Source Precious Metals T-ETC (SPMETL) (SIX Swiss Exchange)


Leave a Comment