8 Best Commodity ETFs of January 2024 (2024)

While the Energy Select SPDR Fund does not hold commodities directly, it offers investors indirect exposure to energy via an allocation to the largest oil companies.

XLE’s portfolio owns 23 holdings. They’re a sampling of stocks in the energy sector of the S&P 500 Index. They give XLE a cross section of equities in the oil, gas and consumable fuel, energy equipment and services industries. They consist of such familiar names as integrated oil and gas giants Exxon Mobil (XOM) and Chevron (CVX) as well as oilfield services provider Schlumberger (SLB) and pipelines titan Kinder Morgan.

XLE is also the largest ETF on this list with over $38 billion in total net assets, while its expense ratio is extremely low at 0.10%, thus offering an inexpensive avenue into the energy sector.

Of course, last year’s energy crisis is an acute reminder of the world’s dependency on this commodity, but investors in XLE benefitted to the tune of a 64.29% 2022 return.

Physical gold is impractical to buy and sell, but the metal still commands strong demand in the financial markets. Enter gold ETFs, which have proven to be highly popular.

The iShares Gold Trust (IAU) has $25.7 billion in total net assets. In trails the SPDR Gold Trust (GLD), which is roughly twice its size. But GLD charges a 0.40% expense ratio while IAU is cheaper at 0.25%.

The underlying gold itself is held at the London branch of JPMorgan Chase Bank. IAU relieves individual investors of the difficulties in purchasing, storing, insuring and transporting bullion. Thus, IAU offers investors a simple way to gain exposure to gold for a reasonable fee in a fund with deep liquidity.

The Invesco DB Commodity Index Tracking Fund offers exposure to a wide range of commodities across the energy, metals and agricultural sectors.

This ETF is rebalanced and reconstituted annually in November.The Fund caters to investors who want a cost-effective and convenient way to invest in commodity futures. DBC’s index holds futures contracts on 14 of the most heavily traded and important physical commodities in the world. So, DBC shareholders get exposure to such assets as gasoline, West Texas intermediate (WTI) crude oil, Brent crude, New York Harbor ultra-low sulfur diesel, gold, sugar, soybeans, copper, corn, wheat and aluminum.

In this way, DBC offers diversification and broad exposure across the commodities spectrum, and it comes with a lower risk profile than many other commodity ETFs. Yet despite its diversification, DBC’s five-year average annual return tops its Morningstar commodities broad basket peer group’s average.

The U.S. Oil Fund LP offers investors exposure to oil using near-term WTI futures and rolling them over on a monthly basis.

Given the concentrated nature of the fund and the volatility of oil prices, USO carries a greater risk of volatility than many other ETFs. Its total returns in 2021 and 2022 were about 64% and 29%. But in 2020 it lost about 68%.

USO is also the only ETF on this list to have not generated a positive average annual return over the last five years.

USO offers liquidity, trading 3.7 million shares daily on average over the past three months.

The iShares S&P GSCI Commodity-Indexed Trust is a hybrid ETF, offering exposure to several industries. Still, it tilts heavily toward the energy sector, with a nearly 60% weighting, per GSG’s latest disclosure.

Metals, livestock. agriculture as well as industrial and precious metals are GSG’s other underlying investments. GSG is more diversified than an energy-only ETF, but it’s not quite as diversified as some all-commodity ETFs on our list. GSG can also hold treasury bills and cash.

GSG tracks the S&P GSCI index, holding futures contracts on the index itself rather than the underlying commodities.

Its energy holdings helped pull performance up last year, spearheading GSG’s 24% total return in 2022. That trailed just the all-energy ETFs on our list. However, its five-year average annual return is more modest. That shows the importance of getting timing right when it comes to the volatile world of commodities in general and energy in particular.

Most metal ETFs only provide exposure to gold and silver, but abrdn’s Physical Precious Metals Basket Shares ETF—its full name—offers exposure to gold, silver, platinum and palladium bullion. That enables it to appeal to investors who want to diversify beyond only one metal.

That diversification enabled GLTR to avoid the type of declines some precious metals suffered in 2022. Gold and palladium fell, while silver and platinum rose. GLTR itself fell just short of breakeven. And GLTR’s five-year average annual return is solid if not spectacular. Its risk profile may be attractive for some investors seeking diversification.

It should be noted that exposure to a greater array of metals in the form of GLTR comes with a 0.60% expense fee, above what some popular gold or silver ETFs cost.

Launched in 2007, Invesco’s DB Agriculture Fund is one of the older ETFs in the agriculture space. With roughly 388000 shares of average daily trading volume over the past three months, DBA offers decent liquidity in this space.

In descending order of weight, DBA currently holds futures in sugar, cocoa, live cattle, soybeans, coffee, corn, lean hogs, wheat, feeder cattle and cotton.

With an average annual return of roughly 5% over the past five years, DBA trails some of this list’s other sector ETFs. But for investors looking to allocate to agriculture without the inconvenience of buying their own futures, DBA is a good option at a reasonable fee.

Abrdn’s Bloomberg All Commodity Longer Dated Strategy ETF tracks the total return version of the Bloomberg Commodity Index (BCOM).

BCOM aims to represent the entire commodities trading market. It consists of about two dozen different futures contracts.

In terms of industries, energy accounts for the largest allocation. Natural gas is the biggest segment of that. Other industry allocations include precious metals, agricultural products and livestock.

No single commodity may constitute less than 2% or more than 15% of the BCOM index, while no commodity sector may take up more than 33%. This allows BCD to offer investors well diversified exposure to the physical commodities market for a relatively cheap 0.3% expense ratio.