Market Overview

Ex-Energy, Commodities ETFs Are Doing Alright


There are at least two things that are clear this year regarding the commodities complex and its relevant exchange traded products. First, energy commodities are still in the dumps. Second, some other commodities and the corresponding ETFs, think precious metals, are rebounding in impressive fashion.

“As February comes to an end, so might be the commodity catastrophe.  Although the S&P GSCI Total Return lost another 3.2% in the month (through Feb. 26, 2015,) bringing the year-to-date performance down to -8.2%, half of the 24 commodities in the index were positive for the month. Further, at least one commodity from each sector gained in February, and the majority of sectors, 3 of 5, were positive for the month,” said S&P Dow Jones Indices Global Head of Commodities and Real Assets Jodie Gunzberg in a new note

Amid investors' thirst for safe-haven assets, precious metals ETFs are leading the commodities complex higher. The SPDR Gold Shares (NYSE: GLD), the world's largest bullion-backed ETF is up 15.4 percent year-to-date and has hauled in $4.25 billion in new assets, making it this year's top asset-gathering ETF by a wide margin.

For gold bugs, there is nothing wrong with safe-haven demand and 2016's market action is, to this pointing, reminding investors of gold's utility. In fact, gold has proven its mettle (no pun intended) during market crises ranging from the Soviet sovereign debt crisis to the Long Term Capital Management meltdown to the global financial crisis. The ETFS Physical PM Basket (NYSE: GLTR), which holds a basket of physical gold, silver, palladium and platinum is getting on the act as well with a year-to-date gain of more than 10 percent.

While precious metals ETFs are soaring, the opposite is true of energy commodities funds. The United States Natural Gas Fund (NYSE: UNG) and the United States Oil Fund (NYSE: USO) are down an average of 23.2 percent this year with little in the way of near-term catalysts to lift either fund.

“At the same time, the El Nino is harmful to the performance of natural gas. It was the worst performing commodity for the month with a loss of 24.3%, bringing the S&P GSCI Natural Gas to its lowest level on Feb. 25, 2016 since March 24, 1999, almost 17 years,” adds Gunzberg.

The ongoing tumble in natural gas prices continues luring short sellers to natural gas equities while short interest has also increased in oil exploration and production names.


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