Tough year for commodities….Top 100 commodity ETF’s so far in 2010

By: ispeculatornew
Date posted: 06.15.2010 (4:28 am) | Write a Comment  (4 Comments)

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Commodities used to be owned by institutional investors and day traders and that was it. But in recent years, thanks mainly to ETF’s, they have became so popular that they have almost became an asset class. In fact, many do consider commodities as a separate asset class. The result of this of course has been that almost every investor, from the biggest to the smallest now has commodities in his portfolio, usually through ETF’s. Unfortunately, 2010 has been a very difficult year for commodity ETF’s.

Apart from a few exception, two simple strategies have worked in commodities so far this year:

1-Long Gold
2-Short everything else

There are a few exceptions, but not too many. To get an idea, take a look at the top 100 commodity ETF’s so far this year… just to make it even more clear, I’ve made it easy to see any funds that are “Short” or “Gold related”.

[table “127” not found /]

As you can see, it’s a very recurring theme isn’t it? Just to make things a bit easier, here are top commodity ETF’s that do not follow the two strategies we just mentionned:

[table “129” not found /]

So what explains these strange movements? First off, Gold has been doing well because of all of the uncertainty in the world. Investors all around the world have been buying gold especially because of all of the uncertainty in the world economy. Events like yesterday’s downgrade of Greece debt to Junk status is nothing to help reassure those who are worried. Just take a look at this chart of Gold for 2010.

Last year, many had expected that the economic recovery would be much higher and had pushed commodities such as Oil in anticipation. Obviously, with things being much worse now, those commodities have looked overvalued. Demand has simply not been up to par. Even a strong performance by China has not been enough to compensate for all of the European problems.

Are you surprised by the overall poor performance of commodity ETF’s so far this year?

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4 Comments

  1. Comment by OneDay — June 15, 2010 @ 12:39 pm

    Little correction: I don’t think iPath Goldtman Sachs Crude Oil Total Return Index ETN is related to gold.

    But to answer your question, I am quite surprised for the poor performance of commodity etf’s! And remember, what goes down must come up, isn’t? it has been a tough half year, but i truly believe it will recover in the next half year!

  2. Comment by IS — June 15, 2010 @ 6:18 pm

    @OneDay – Thanks for pointing that out, it was my error.

    And yes, long term, I think commodities will rebound, no doubt, but how long it will take depends on so many factors, the European crisis perhaps being at the top of the list.

  3. Comment by OneDay — June 16, 2010 @ 9:17 am

    We’ll also have to check closely demand in USA because it’s the largest energy consumer in terms of total use!!

  4. Comment by IS — June 16, 2010 @ 9:27 am

    True but China is doing its best to keep up:)

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