Commodity ETFs: New Volatility

Commodity ETFs are among the most popular and successful funds in the market today. They are good for hedging and adding to portfolio diversity. Their volatility also makes them attractive to speculators. Sudden price swings are not uncommon. For most investors these ETFs are best used moderately and as part of a larger portfolio strategy.Commodity ETFs provide direct exposure to precious metals, meats, grains, foods, and energy. These ETFs represent the fundamentals of life. But pricing them is complicated. Commodities are sensitive to any change in supply and demand expectations. Calculation of supply and demand for commodities involves many factors, among them: global growth expectations, inflation expectations, the value of the dollar, interest rates, political events and weather.This past week has been unusually volatile. The chart below compares the price of an oil ETF, United States Oil (NYSEArca:USO - News) with precious metals fund PowerShares DB Precious Metals (NYSEArca:DBP - News), base metals fund PowerShares DB Base Metals ETF (NYSEArca:DBB - News), and agricultural ETF Powershares DB Agriculture (NYSEArca:DBA - News). The equity benchmark Standard and Poor's Depositary Receipts (NYSEArca:SPY - News) is also pictured.

The chart above shows that over the past week precious metals (DBP) has been as volatile as oil (USO). Base metals (DBB) and agriculture (DBA) are tracking. The big move in precious metals is a little unusual. Precious metals tend to be less volatile than energy or agriculture.Typically energy is the most volatile commodity. Volatility ranges from 30% to 50%. The price of oil is volatile because expectations for both demand and supply can change rapidly. Demand for oil hinges on global growth expectations, and growth in emerging markets particularly. These expectations are often revised. Small revisions have big consequences for demand. The supply of oil is also often uncertain. Much of the marketable oil comes from politically or environmentally sensitive areas. Currently few producers have excess capacity and willingness to even out price swings.Other commodities are typically less volatile. Industrial metals for example have a volatility of 20% to 30%. They are more sensitive to demand expectations than oil but supply is more predictable. Agricultural products typically have a volatility of below 20%. Global demand for food is more stable than energy. Weather impacts supply but agricultural products tend to be geographically diverse and more substitutable than oil. Precious metals are historically the least volatile of the commodity suite. Both supply and demand tend to be stable.The movement in precious metals and oil shown in the chart above cannot be traced solely to supply and demand issues. The role of speculation in commodity pricing is increasingly important, skewing traditional volatility calculations. Precious metals volatility in particular has increased as the chart above shows. This increase is due in part to the availability of metals brought on by the presence of ETFs that track them.Speculation is a big part of the recent sell off in both precious metals and oil. Powershares Precious Metals DBP would be more volatile with a different product mix. DBP contains exposure to only two metals, gold (80%) and silver (20%). The chart below compares the price of two ETFs, the SPDR Gold Trust (NYSEArca:GLD - News) and the iShares Silver Trust (NYSEArca:SLV - News) which hold gold and silver respectively with the benchmark SPY.
The sell-off in silver over the past week came after speculation helped drive silver up over 100% in the last twelve months. The bull market for silver is accompanied by expanding demand from emerging markets, very low interest rates, and a declining dollar. Emerging markets are growing at high single digits and are increasing their demand for resources. Low interest rates help to drive demand because investors forego less by owning a non-productive asset like gold. The dollar also plays a role. When the dollar is in decline, commodity ETFs are popular as a hedge.Two factors reversed last week. Emerging markets are having to raise interest rates to contain inflation there, slower global growth outlook overall is forecast. The dollar strengthened. Interest rates in the U.S. remained low.The effectiveness and low cost of ETFs have helped to make gold, silver and other metals favorites for speculators. Ownership of SLV and GLD involves buying physical possession of these metals. Not all commodity ETFs achieve exposure this way. There is a good reason for this. A bushel of wheat or soybeans, or even a barrel of oil, is more difficult or costly to have physical possession over the long term than a bar of gold. Most commodity ETFs therefore own short-term futures contracts are rolled over monthly to maintain exposure. Others hold longer-term futures and stagger the futures contract months. Finally are also commodities ETNs that seek to track the price of a commodity by the use of a traded note.Below a list of commodity ETFs and ETNs:GENERAL COMMODITY
  • iShares GSCI Commodity-Indexed Trust ETF (NYSEArca:GSG - News)
  • Dow Jones-AIG Commodity Index Total Return ETN (NYSEArca:DJP - News)
  • ELEMENTS Rogers International Commodity Index ETN (NYSEArca:RJI - News)
  • Goldman Sachs Commodity Index (GSCI) Total Return Index ETN (NYSEArca:GSP - News)
  • GreenHaven Continuous Commodity Index Fund (NYSEArca:GCC - News)
  • ELEMENTS S&P Commodity Trends Indicator ETN (NYSEArca:LSC - News)
  • PowerShares DB Commodity Index Tracking Fund (NYSEArca:DBC - News)
  • PowerShares DB Commodity Long ETN (NYSEArca:DPU - News)
  • FOCUSED COMMODITY
  • PowerShares DB Agriculture Fund (NYSEArca:DBA - News)
  • ELEMENTS Rogers International Commodity Agriculture Index ETN (NYSEArca:RJA - News)
  • Dow Jones-AIG Livestock Total Return ETN (NYSEArca:COW - News)
  • ELEMENTS MLCX Grains Index ETN (NYSEArca:GRU - News)
  • iPath Dow Jones-AIG Sugar Total Return Sub-Index ETN (NYSEArca:SGG - News)
  • iPath Dow Jones-AIG Cotton Total Return Sub-Index ETN (NYSEArca:BAL - News)
  • iPath Dow Jones-AIG Softs Total Return Sub-Index ETN (NYSEArca:JJS - News)
  • Dow Jones-AIG Agriculture Total Return ETN (NYSEArca:JJA - News)
  • Dow Jones-AIG Grains Total Return ETN (NYSEArac:JJG)
  • iPath Dow Jones-AIG Cocoa Total Return Sub-Index ETN (NYSEArca:NIB - News)
  • iPath Dow Jones-AIG Coffee Total Return Sub-Index ETN (NYSEArca:JO - News)
  • PowerShares DB Agriculture Long ETN (NYSEArca:AGF - News)
  • E-TRACS CMCI Food ETN (NYSEArca:FUD - News)
  • METALS
  • streetTRACKS Gold Shares ETF (NYSEArca:GLD - News)
  • iShares COMEX Gold Trust ETF (NYSEArca:IAU - News)
  • iShares Silver Trust ETF (NYSEArca:SLV - News)
  • Dow Jones-AIG Industrial Metals Total Return ETN (NYSEArca:JJM - News)
  • Dow Jones-AIG Nickel Total Return ETN (NYSEArca:JJN - News)
  • ELEMENTS Rogers International Commodity Metals Index ETN (NYSEArca:RJZ - News)
  • Dow Jones-AIG Copper Total Return ETN (NYSEArca:JJC - News)
  • iPath Dow Jones-AIG Aluminum Total Return Sub-Index ETN (NYSEArca:JJU - News)
  • iPath Dow Jones-AIG Platinum Total Return Sub-Index ETN (NYSEArca:PGM - News)
  • iPath Dow Jones-AIG Lead Total Return Sub-Index ETN (NYSEArca:LD - News)
  • PowerShares DB Base Metals Fund (NYSEArca:DBB - News)
  • PowerShares DB Base Metals Long ETN (NYSEArca:BDG - News)
  • PowerShares DB Precious Metals Fund (NYSEArca:DBP - News)
  • PowerShares DB Silver Fund (NYSEArca:DBS - News)
  • PowerShares DB Gold Fund (NYSEArca:DGL - News)
  • E-TRACS CMCI Long Platinum ETN (NYSEArca:PTM - News)
  • E-TRACS CMCI Silver ETN (NYSEArca:USV - News)
  • ENERGY
  • United States Oil Fund (NYSEArca:USO - News)
  • United States 12 Month Oil Fund (NYSEArca:USL - News)
  • United States Gasoline Fund (NYSEArca:UGA - News)
  • United States Heating Oil Fund (NYSEArca:UHN - News)
  • United States Natural Gas Fund (NYSE:UNG - News)
  • Dow Jones-AIG Natural Gas Total Return ETN (NYSEArca:GAZ - News)
  • E-TRACS CMCI Energy ETN (NYSEArca:UBN - News)
  • ELEMENTS Rogers International Commodity Energy Index ETN (NYSEArca:RJN - News)
  • Goldman Sachs Crude Oil Total Return ETN (NYSEArca:OIL - News)
  • PowerShares Deutsche Bank Energy Fund (NYSEArca:DBE - News)
  • PowerShares DB Crude Oil Long ETN (NYSEArca:OLO - News)
  • PowerShares DB Oil Fund (NYSEArca:DBO - News)
SHORT/LEVERAGE
  • ProShares Ultra DJ-AIG Crude Oil ETF (NYSEArca:UCO - News)
  • ProShares Ultra Gold ETF (NYSEArca:UGL - News)
  • ProShares Ultra Silver ETF (NYSEArca:AGQ - News)
  • ProShares UltraShort DJ-AIG Crude Oil ETF (SCO)
  • PowerShares DB Crude Oil Double Short ETN (NYSEArca:DTO - News)
  • PowerShares DB Agriculture Double Long ETN (NYSEArca:DAG - News)
  • PowerShares DB Agriculture Double Short ETN (NYSEArca:AGA - News)
  • PowerShares DB Base Metals Double Long ETN (NYSEArca:BDD - News)
  • PowerShares DB Base Metals Double Short ETN (NYSEArca:BOM - News)
  • PowerShares DB Base Metals Short ETN (NYSEArca:BOS - News)
  • PowerShares DB Crude Oil Short ETN (NYSEArca:SZO - News)
  • PowerShares DB Commodity Double Long ETN (NYSEArca:DYY - News)
  • ProShares Ultra DJ-AIG Commodity ETF (NYSEArca:UCD - News)
  • ProShares UltraShort DJ-AIG Commodity ETF (NYSEArca:CMD - News)
  • PowerShares DB Gold Double Long ETN (NYSEArca:DGP - News)
  • PowerShares DB Gold Double Short ETN (NYSEArca:DZZ - News)
  • PowerShares DB Gold Short ETN (NYSEArca:DGZ - News)
Jonathan Bernstein has been writing about ETFs since 2003 and is the author of Sector Trading: A Year in Exchange Traded Funds.

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • Deutsche CEO tries to reassure staff as shares plunge
    Deutsche CEO tries to reassure staff as shares plunge Reuters - 15 minutes ago

    FRANKFURT/LONDON (Reuters) - Deutsche Bank's (DBKGn.DE) chief executive sought to reassure his staff on Friday that Germany's largest lender remained robust after its shares again fell to record lows, sending tremors through global financial … More »

  • First Thai babies diagnosed with Zika-linked microcephaly
    First Thai babies diagnosed with Zika-linked microcephaly AFP News - 16 minutes ago

    Thai health authorities on Friday said microcephaly in two babies was caused by the Zika virus, in what is believed to be Southeast Asia's first confirmed cases linking the sickness and the birth defect. The announcement could affect Thailand's key … More »

  • Minimum EPF savings for 55-year-old set to RM228k New Straits Times - 17 minutes ago

    KUALA LUMPUR: The Employees Provident Fund (EPF) has announced that the quantum for the basic savings will be revised from RM196,800 to RM228,000 effective Jan 1, 2017. The amount will be set as the minimum target EPF savings members should have … More »

  • UK funds dump stocks for bonds, emerging markets - Reuters poll
    UK funds dump stocks for bonds, emerging markets - Reuters poll Reuters - 24 minutes ago

    LONDON (Reuters_ - British funds have slashed equity holdings in their portfolios, allocating more capital to bonds and to buoyant emerging markets as they fret about the risks posed by Europe's banks and U.S. elections. The Reuters monthly survey … More »

  • Global funds add to Japan, euro zone bonds, see no further sell offs - Reuters poll
    Global funds add to Japan, euro zone bonds, see no further sell offs - Reuters poll Reuters - 31 minutes ago

    Global investors raised holdings of Japanese bonds to four-year highs in September and bought more euro zone debt, shrugging off a mid-month market sell-off and expressing faith in central banks' commitment to their asset-buying programmes. The … More »

  • Renault signs deal for venture in Iran as its economy opens
    Renault signs deal for venture in Iran as its economy opens Associated Press - 36 minutes ago

    Renault has reached a deal with Iran's government to open a plant making at least 150,000 vehicles a year, as European companies race for a share of Iran's market now that international sanctions have ... … More »

  • HeidelbergCement relaxed about Brexit, had good August in UK
    HeidelbergCement relaxed about Brexit, had good August in UK Reuters - 39 minutes ago

    Germany's HeidelbergCement (HEIG.DE) is seeing strong business in the UK and is more worried about the economic effects if Donald Trump wins the U.S. presidential election than it is about Brexit, its chief executive said on Friday. Britain is the … More »

  • Eurozone inflation doubles as low oil price impact fades
    Eurozone inflation doubles as low oil price impact fades Associated Press - 56 minutes ago

    Inflation in the 19-country eurozone doubled in September to near two-year highs as the impact of lower oil prices began to fade, official figures showed Friday, in a development that's likely to ease ... … More »

  • Revealed: Ex-MaGIC CEO Cheryl Yeoh’s new designation
    Revealed: Ex-MaGIC CEO Cheryl Yeoh’s new designation e27 - 57 minutes ago

    Since leaving MaGIC in December 2015, the public has been anticipating the founding CEO’s next adventure Former MaGIC founding CEO Cheryl Yeoh has been announced as the new director of Flexiroam, a telco company that enables customers to bypass … More »

  • Some relief for big-spending ECB as euro zone inflation ticks up
    Some relief for big-spending ECB as euro zone inflation ticks up Reuters - 58 minutes ago

    BRUSSELS/FRANKFURT (Reuters) - Inflation in the euro zone ticked up in September, data showed on Friday, giving the European Central Bank some confidence its stimulus programme is pulling the bloc's economy away from the deflationary brink. … More »

  • Sainsbury's names Simon Roberts as retail & operations director Reuters - 1 hour 0 minutes ago

    Sainsbury's (SBRY.L), Britain's No. 2 supermarket chain, on Friday named Simon Roberts as its new retail and operations director but may have to wait until July 2017 before he can start. Roberts was most recently executive vice president of … More »

  • YTL acquires three new luxury properties in the UK Business Times - 1 hour 5 minutes ago

    KUALA LUMPUR: YTL Hotels is expanding its luxury portfolio with the recent acquisition of three properties in Edinburgh, Berkshire and London, strengthening the company’s presence within the United Kingdom. The company’s current portfolio in the … More »

  • Japan's Mitsubishi Motors to resume sales after latest cheating scandal
    Japan's Mitsubishi Motors to resume sales after latest cheating scandal Reuters - 1 hour 6 minutes ago

    Japanese automaker Mitsubishi Motors Corp (7211.T) will resume domestic sales of eight vehicle models on Oct. 1, the company said on Friday, after correcting overstated mileage readings in its second cheating scandal this year. Japan's sixth … More »

  • Gold gains as stocks slide on Deutsche Bank worries
    Gold gains as stocks slide on Deutsche Bank worries Reuters - 1 hour 7 minutes ago

    Spot gold was up 0.48 percent to $1,326.41 an ounce by 1005 GMT. Gold has gained one percent so far this month, partly because of the weaker dollar after the U.S. Federal Reserve chose not to raise interest rates. U.S. gold futures were up 0.29 … More »

  • Oil falls as investors cash in on OPEC deal rally, dollar rises
    Oil falls as investors cash in on OPEC deal rally, dollar rises Reuters - 1 hour 8 minutes ago

    Oil prices fell on Friday on a stronger dollar and as investors cashed in on a 6-percent rise in just one day after OPEC members agreed to reduce output for the first time in eight years to stifle a two-year price slide. Global benchmark Brent … More »

  • Renault to enter new joint venture in Iran Reuters - 1 hour 18 minutes ago

    Renault (RENA.PA) said on Friday it had signed a deal to enter into a new joint venture in Iran that would allow it to strengthen its presence in the country after most trade sanctions were lifted earlier this year. In a statement, Renault said it … More »

  • Stock markets tumble on Deutsche Bank strains
    Stock markets tumble on Deutsche Bank strains AFP News - 1 hour 22 minutes ago

    European and Asian stock markets slumped Friday as Deutsche Bank shares plunged on widening concerns over its financial strength, causing ripples of fear across the global financial sector. Bloomberg reported that several hedge funds had withdrawn … More »

  • SE Asia Stocks-Down; Indonesia falls on cigarette tax hike concerns Reuters - 1 hour 26 minutes ago

    By Anusha Ravindranath Sept 30 (Reuters) - Southeast Asian stocks ended lower on Friday with Indonesia posting its biggest intraday percentage loss in over two weeks as the announcement of a tax hike on ... … More »

  • Seven & I Slashes Forecast on Department Store Writedowns (2) Bloomberg - 1 hour 31 minutes ago

    Net income will be 80 billion yen ($793 million) for the fiscal year ending February 28, 2017, about 53 percent less than the 172 billion yen forecast it issued on Aug. 2, Japan’s largest retailer by market value said Friday in a statement. The … More »

  • Airbus Group to merge with planemaking unit
    Airbus Group to merge with planemaking unit Reuters - 1 hour 42 minutes ago

    Airbus Group (AIR.PA) said on Friday it would merge with its planemaking unit, strip out bureaucracy and simplify its brand, marking a break with its complex corporate roots as it prepares for tougher expected competition. Europe's largest … More »

  • RBC cutting 15 investment banking jobs in London - sources
    RBC cutting 15 investment banking jobs in London - sources Reuters - 1 hour 50 minutes ago

    LONDON/TORONTO (Reuters) - Royal Bank of Canada (RBC) is cutting 15 investment banking jobs in London amid a slowdown in activity in the region, sources familiar with the matter told Reuters. RBC Capital Markets, the investment banking arm of RBC … More »

  • BRIEF-Lion Forest Industries enters into a conditional share sale agreement Reuters - 1 hour 51 minutes ago

    Sept 30 (Reuters) - Lion Forest Industries Bhd * Entered into a conditional share sale agreement to acquire from tan sri cheng heng jem about 5.18% of the voting shares in parkson holdings * Deal for total ... … More »

  • EU regulators open to Italy request for more time to sell banks Reuters - 1 hour 52 minutes ago

    Italy has asked for more time to sell four small savings banks it bailed out last year, the European Commission said on Friday, saying it was open to the request. "The Commission is in close and constructive contacts with the Italian authorities … More »

  • UK's IG Group to buy DailyFX from FXCM Inc for $40 million Reuters - 2 hours 5 minutes ago

    IG Group said the deal, which is expected to close by the end of October, would add about 5 million pounds ($6 million) to ongoing operating costs annually and add to earnings from IG's 2018 financial year. IG Group, which has over 152,600 active … More »

  • BRIEF-Boustead holdings bhd proposed disposal of lands by Boustead Petroleum Marketing Sdn Bhd Reuters - 2 hours 13 minutes ago

    Sept 30 (Reuters) - Boustead Holdings Bhd * Boustead petroleum marketing intends to undertake the proposed disposal of two pieces of adjacent lands for compensation of 16.7 million rgt * Proposed disposal ... … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.152-0.008-5.00%
    N21.SI
    0.12+0.01+12.15%
    40F.SI
    0.115+0.003+2.68%
    40E.SI
    0.113+0.007+6.60%
    43E.SI
    3.97-0.05-1.24%
    Z74.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.186+0.025+15.53%
    AWS.SI
    0.12+0.01+12.15%
    40F.SI
    0.164+0.016+10.81%
    40N.SI
    1.35+0.11+8.43%
    U19.SI
    0.475+0.035+7.95%
    NC2.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.36-0.24-40.00%
    AWG.SI
    0.20-0.06-23.08%
    AWI.SI
    0.27-0.03-11.48%
    BQO.SI
    0.30-0.03-9.09%
    5VP.SI
    0.265-0.025-8.62%
    BKA.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.36390.000.00%
    USDSGD=X
    1.5239-0.0061-0.40%
    EURSGD=X
    1.7675-0.0006-0.03%
    GBPSGD=X
    74.2070+0.136+0.18%
    SGDJPY=X
    5.6836-0.0004-0.01%
    SGDHKD=X
    3.0308+0.0079+0.26%
    SGDMYR=X
    9,568.2803+25.5674+0.27%
    SGDIDR=X
    4.8918+0.0048+0.10%
    SGDCNY=X
    1.0393-0.0016-0.15%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,328.60+2.60+0.20%
    GCZ16.CMX
    19.37+0.18+0.95%
    SIZ16.CMX
    95.01-0.66-0.69%
    ^XAU
    2.20+0.01+0.32%
    HGZ16.CMX
    43.85+0.41+0.94%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.12-0.01
    ^FVX
    1.56-0.01
    ^TNX
    2.28-0.01
    ^TYX