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Best Commodity ETFs

Discover the best commodity ETFs to hedge against inflation and provide commodity exposure in the ongoing global interest rate hike cycle. I’ve included pros and cons, and recent performances of my top commodity ETF picks.

Discover: My guide to the Best ETF trading platforms UK.

The best commodity ETFs of April 2024

Here are 7 of the best commodity ETFs to buy in April at a glance:

  1. SPDR Gold Shares – Capitalising on recent banking issues surrounding Silicon Valley Bank and Credit Suisse
  2. L&G All Commodities UCITS ETF – Inexpensive annual charges
  3. Invesco Bloomberg Commodity Index – Healthy spread of commodities
  4. Goldman Sachs Physical Gold ETF – Considered a ‘safe haven’
  5. Ossiam Risk Weighted Enhanced Commodity Ex Grains TR UCITS ETF – Exposure to oil and natural gas futures
  6. US 12-Month Oil Fund ETF – Previously an effective hedge against economic risks
  7. iShares Silver Trust – Largest silver-backed ETF in the markets

1. SPDR Gold Shares (GLD)

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The SPDR Gold Shares ETF is the largest gold-backed ETF traded on the financial markets. With the value of assets managing to reach $59.4 billion, it continues to attract retail investors and even institutional investors seeking a haven from inflationary risks.

In March, net inflows on gold ETFs reached $1.9 billion, which is said to have been fuelled by the recent banking issues surrounding Silicon Valley Bank in the US and Credit Suisse in mainland Europe. The failure of Silicon Valley Bank sparked unease in the forex markets, causing the dollar to weaken and causing attention to turn towards precious metals like gold and silver.

The SPDR Gold Trust was the first physically gold-backed ETF established in 2004 and it now has multiple custodians in the form of HSBC and JPMorgan.

  • Fund size: £47.91 billion
  • Annual charges: 0.40%
  • Dividend yield: 0%
  • Best for: retail investors with a significant portion of equities in their portfolios. Gold ETFs can be hedged against economic uncertainty and inflation.

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2. L&G All Commodities UCITS ETF (BCOG.L)

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The L&G All Commodities UCITS ETF is a very attractive commodity ETF at the time of writing, due largely to its returns and its inexpensive annual charges. At the time of writing, investors in this ETF are charged just 0.15% per annum to have their commodity funds managed.

The fund is designed to mimic the market performance of the underlying L&G All Commodities index.

This ETF carries a broad exposure to heavily traded energy commodities, with a basket of short-dated commodity futures contracts across various physical assets including gold, crude oil, soybeans, corn, natural gas, and aluminium.

After the shock of the Covid-19 lockdown, this ETF shone throughout 2021 and 2022 and although its value has corrected somewhat in 2023 it remains up by around 490.00 (GBX) since its March 2020 lows.

  • Fund size: £51 million
  • Annual charges: 0.15%
  • Dividend yield: 0%
  • Best for: retail investors seeking to enhance their current savings portfolio and are prepared to tolerate a higher-than-average risk-to-reward profile.

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3. Invesco Bloomberg Commodity Index (CMOD.L)

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This commodities ETF is designed to track the performance of the Bloomberg Commodity Index, minus annual management fees.

Overseen by Invesco, this ETF is up over 73% in the last three years, according to Invesco themselves.

There is a healthy spread of commodities within the composition of the Invesco DB Commodity Index ETF. More than a quarter (27.73%) includes energy commodities, meanwhile, grains and precious metals make up 22.43% and 20.65% respectively. The Invesco DB Commodity Index ETF is eligible for those retail investors thinking of using this benchmark in an ISA or SIPP.

  • Fund size: £1.323 billion
  • Annual charges: 0.19%
  • Dividend yield: 0%
  • Best for: retail investors prepared to take a medium-to-long-term approach to their investments. This ETF tracks the market values of no less than 24 commodities across six commodity classifications.

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4. Goldman Sachs Physical Gold ETF (AAAU)

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The overall objective of Goldman Sachs’ Physical Gold ETF is to reflect the market value of gold, minus the trust’s annual operating fees.

Like the SPDR Gold Shares ETF, Goldman Sachs’ equivalent ETF offers shares that aren’t the exact equivalent of a physical gold investment but are as close as possible via the securities market.

In the year to date, the Goldman Sachs Physical Gold ETF has risen over 8% as of April 25. Across the last five years, it has enjoyed even greater returns, posting 66.75% growth to April 25, 2023.

This is yet another reflection of the shift towards relative ‘safe havens’, in the midst of geopolitical and inflationary tensions.

  • Fund size: £509.38 million
  • Annual charges: 0.18%
  • Dividend yield: 0%
  • Best for: retail investors seeking an entry-level mechanism to invest in gold, without having to invest directly in the precious metal.

Best Range of ETFs at InvestEngine

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Whenever you invest, your capital is at risk. Minimum investment £100, T&Cs apply.

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5. Ossiam Risk Weighted Enhanced Commodity Ex Grains TR UCITS ETF (CRWU.L)

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Ossiam’s Risk Weighted Enhanced Commodity Ex. Grains TR fund aims to replicate the performance of the Risk Weighted Enhanced Commodity Ex. Grains Index Total Return USD value.

The original index was established by Societe Generale.

Essentially, this index tracks a whole host of sub-indices involving a string of commodities, managed by S&P. This covers the likes of Brent Crude and gas oil, coffee, sugar, copper, lead, gold, and silver.

The high weighting of commodities within the energy group is due to the significance of this category, with particular exposure to oil and natural gas futures.

  • Fund size: £2 million
  • Annual charges: 0.45%
  • Dividend yield: 0%
  • Best for: retail investors willing to take a medium-to-long-term view – Ossiam’s recommended investment horizon for this commodity ETF is a minimum of five years.

Best Range of ETFs at InvestEngine

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Whenever you invest, your capital is at risk. Minimum investment £100, T&Cs apply.

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6. US 12-Month Oil Fund ETF (USL)

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The US 12-Month Oil Fund ETF (USL) is designed to purchase long contracts on the crude oil futures markets, as well as other oil-linked futures contracts. The fund may also invest in forwards and swap contracts wherever necessary.

Essentially, this United States Oil Fund ETF tracks the value of West Texas Intermediate (WTI) light, sweet crude oil. Shares in the USL ETF are listed and traded on the NYSE Arca.

It’s one of the more expensive commodities ETFs to invest in within this list, with annual charges amounting to 0.90%.

However, the USL ETF proved an effective hedge against economic risks during the pandemic and is still well above pre-pandemic levels.

The value of WTI crude oil may depend on developed economies avoiding recession during this interest rate hike cycle. However, it’s still an essential commodity for light and heavy industries worldwide.

  • Fund size: £66.65 million
  • Annual charges: 0.90%
  • Dividend yield: 0%
  • Best for: retail investors seeking direct exposure to US WTI crude oil without having to create and verify a separate account to trade futures.

Best Range of ETFs at InvestEngine

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Whenever you invest, your capital is at risk. Minimum investment £100, T&Cs apply.

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7. iShares Silver Trust (SLV)

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We’ve mentioned gold twice so far in my list of the best commodity ETF options and there is another precious metal that’s proving exceptionally popular and equally fruitful in the market – silver.

iShares’ Silver Trust ETF is the biggest silver-backed ETF in the markets. The fund opts to own and physically store commodities like silver bars in bank vaults in the same way that Goldman Sachs does for its Physical Gold ETF.

Silver ETFs like these are a cost-effective route to physical silver, paying only a 0.37% premium to invest through the iShares Silver Trust ETF, according to iShares.

  • Fund size: £9.51 billion
  • Annual charges: 0.50%
  • Dividend yield: 0%
  • Best for: retail investors seeking direct exposure to the day-to-day market value of silver bullion.

Best Range of ETFs at InvestEngine

  • Choose from over 550+ ETFs
  • Invest online or via the app
  • Buy, sell or rebalance in just one click

Whenever you invest, your capital is at risk. Minimum investment £100, T&Cs apply.

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What are commodity ETFs?

An exchange-traded fund (ETF) is a cluster of financial assets – in this case, commodities – which are traded in real-time on the financial markets. Commodity ETFs will track the value of an underlying commodity.

Alternatively, they may also track the value of selected companies involved in the production of certain commodities, such as precious and industrial metals, natural gas, and oil.

How do I invest in commodity ETFs?

The best way to buy into commodities ETFs is to open a general investment account. Investing in commodities is usually achieved via the purchase of forward or futures contracts. A commodities ETF may also focus on individual precious physical commodities.

It may also be possible to invest in commodity ETFs that plot the performance of commodity indices that feature many commodities via physical storage and derivative-based forward or futures contracts.

Why invest in commodities ETFs?

Commodity ETFs often come into focus when the world is facing growing geopolitical conflicts as well as high levels of inflation. That’s because a commodity ETF can act as a useful form of diversification to other elements of an investment portfolio like equities, which may be adversely affected by rampant inflation.

Commodities – which can be precious metals or softer ones like wheat and soybeans – typically have a steady demand, regardless of economic and geopolitical climates. Consequently, commodities ETFs can provide a consistent return in the face of uncertainty elsewhere in the financial markets.

Best Commodity ETFs FAQs

What is the most popular commodity ETF?

The SPDR Gold Trust is one of the most popular commodity ETFs for gold investors. It’s said to have $59.4 billion worth of assets under management, ahead of other commodity-backed products.

Are commodity ETFs a good investment?

Investing in commodity ETFs can be a good investment because many commodities are deemed inflation-proof as they remain in demand in all economic climates. Nevertheless, the risks still exist.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial situation.

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