Commodities are attracting interest given the wild moves we've seen in the market in 2020. From dramatic increases in value and all-time highs to increased demand and declines to an April 20 low a barrel, it's no wonder investors are taking note.
We pick up where we left off with two more ETFs that provide access to commodities through exchange-traded funds (ETFs).
After yesterday breaking down the main considerations for investing in ETFs composed of commodity futures contracts, today let's take a look at one of these ETFs, which covers a diverse group of commodities. Considering the incredible, we will also explore a fund that retains physical holdings of the precious metal.
1. Aberdeen Standard Bloomberg All Commodity Strategy K-1 Free ETF
Current price: $ 19.92
52 Week Range: $ 16.36 – $ 23.11
Dividend Yield: 1.68%
Dividend frequency: annual
Expense Ratio: 0.25% per year, or $ 25 with an investment of $ 10,000.
The Aberdeen Standard Bloomberg All Commodity Strategy K-1 Free ETF (NYSE 🙂 is actively managed and also tracks the index.
The reference index consists of 23 commodities determined each year on the basis of 2/3 on liquidity and 1/3 on dollar-adjusted production data. Weight limits (i.e. 33%) are also used to limit concentration in a particular sector.
BCI's sectoral holdings (by weighting) include agriculture (29.07%), energy (27.44%), precious metals (22.48%), industrial metals (15.77%) and livestock (5 , 24%).
Year-to-date (YTD), the fund is down about 12%. However, since hitting a 52-week low in March, BCI is up about 25%.
A range of factors have supported certain commodity prices in recent weeks, including weakness, improved demand from China, production cuts, supply disruptions and a potential vaccine for the novel coronavirus.
Gold, silver and, and are among the list of commodities whose prices have risen in 2020 so far. At the other end of the spectrum, and especially oil prices.
Although oil prices have risen since the sharp falls in March and April, YTD, they are still falling significantly. In early 2020, both global benchmark and US benchmark West Texas Intermediate (WTI) prices were above $ 60 a barrel, while they are currently at $ 45.23 and $ 42.30 respectively.
As of today, BCI's five largest holdings are 100 oz gold. futures (18.02), copper futures (7.86%), (7.65%), (6.09%) and (5.99%). Potential investors should study the different risk-return profiles, especially with regard to the rollover returns associated with investing in futures contracts.
2. Aberdeen Standard Physical Silver Shares ETF
Current price: $ 28.06
52 Week Range: $ 11.30 – $ 28.44
Dividend Yield: N / A
Expense Ratio: 0.30% per year, or $ 30 with a $ 10,000 investment.
Aberdeen Standard Physical Silver Shares ETF (NYSE 🙂 reflects the performance of the price of silver bullion. It contains the allocated physical silver bars that are stored in secure vaults in London, UK. There is no roll-over because the fund does not hold any futures contracts.
The metal is priced according to the specifications of the London Bullion Market Association (LBMA) for "Good Delivery", an international benchmark for the pricing of physical silver.
As a precious metal, silver is used as an investment medium in the form of precious metal, coins, jewelery or utensils. Due to the properties of the metal, half of the annual demand for the white metals comes from use in industrial production.
In particular, the rush for silver in 2020 was driven by a combination of factors, such as historic lows, a weaker US dollar, growing concerns about a second wave of COVID-19 cases, heightened US-China tensions and the upcoming US presidential election.
So far in the year, the fund is up 62.01%. It peaked in 52 weeks on August 10, 2020. While gains can be taken in prices and thus SIVR in the short term, we are still optimistic about the precious metal.
Bottom Line
Various factors can influence the price of a particular product, such as supply and demand of that product, currency fluctuations, geopolitical developments and economic growth. Commodity prices, especially commodity prices, and the US dollar generally have an inverse relationship. Investors who think there could be more wind in the rest of the year to support commodity prices may want to pay attention to commodity ETFs.
