Although commodities might lack the luster and hype of the stock and bond markets, they nonetheless performed impressively throughout most of 2018. Indeed, ETF.com reports that strong performance in energy names led commodities to their highest level since 2014, as of earlier this fall. With a rally going on for more than two years, commodities quietly rose to strong levels of performance. Along with gains to individual stocks, the S&P GSCI Total Return Index climbed by 11.7% from the beginning of 2018 through mid-October. Of course, in more recent weeks as the price of oil has plunged, commodities more broadly have also fallen from those highs. Nonetheless, at this point, there is still good reason to watch the commodities space. Exchange-traded funds (ETFs) have tracked commodities performance closely, and many of these investment products are quickly rising as well.
Some of the most successful commodities funds through the fall were those which focus on particular segments of the sector. The Invesco DB Oil Fund (DBO), for instance, climbed by more than 26% over the course of the year through its high point in October. It has since fallen, along with other prominent oil ETFs like the United States 3x Oil Fund (USOU). Nonetheless, those investors who bought into DBO at the start of the year have still seen returns of more than 10% as of this writing.
Metals Shorting Pays Off
Even more so than oil ETFs, those funds that have made bets against metals have seen impressive gains. The VelocityShares 3X Inverse Silver ETN (DSLV), for instance, has climbed by almost 63% year-to-date. The ProShares UltraShort Silver fund (ZSL) returned about 39% over the same period and through the end of October.
These funds have produced incredible results thanks to drops in the price of gold and silver across the year. These and other ETFs which are set up to rise when the prices of these precious metals decline have seen big gains.
Other Areas of Interest
While commodities funds often focus on oil and precious metals, there are hosts of other products with other specialties as well. Broad energy funds like the Elements Rogers International Commodity Index-Energy TR ETN (RJN) have made gains; in the case of RJN, the fund is up more than 10% for the year as of this writing.
Natural gas funds have performed exceptionally well, particularly in recent weeks. An ETF of note in this area is the United States Natural Gas Fund LP (UNG), returning more than 24% year-to-date. The iPath Series B Bloomberg Natural Gas Subindex Total Return ETN (GAZB) is also up by more than 14% this year.
While a recent plunge in oil prices may have wiped out many of the gains that popular commodities ETFs won across the first three quarters of the year, there are nonetheless commodities-related ETFs and similar products which are capitalizing (or which could potentially capitalize) on this volatility. The ProShares UltraPro 3X Short Crude Oil ETF (OILD) is an excellent example. Although the fund was down more than 48% from January 1 through October 31st, it has reversed course in the past three months, climbing by more than 21%. The fund is still down considerably for the year, but it is positioned to continue to gain if the price of crude continues to plummet going forward. Nonetheless, investors may be worried that the best time to play the commodities ETF game in 2018 has passed. Perhaps a closer look into particular ETFs and individual strategies will provide opportunities for investment gains, no matter how the price of commodities like metals and oil may behave going forward.