Commodity ETFs and the Super Cycle

Includes: DBA, GSG, HAP, RJA
by: Tom Lydon

Many analysts and investors alike are bullish on the commodity cycle and believe that it will continue. In fact, exchange traded funds are being cited as a possible driving force for increasing demand.

Citi’s Alan Heap believes that the commodity super cycle will continue regardless of whether another global slowdown occurs, and ETFs could at least in part help drive the demand.

These days, gold ETFs account for 90% of the entire commodity ETF market. Vincent Fernando for Business Insider reports that gold ETF flows surged during the market crisis, then plateaued and now have ticked back up.

We also recently witnessed what happened when the extremely popular ETFS Physical Platinum (NYSEARCA:PPLT) fund launched – it quickly drove prices for the precious metal higher.

ETFs won’t be wholly responsible for the uptick in commodity demand, of course. The commodity-driven cycle should be heavily aided by the growing consumption seen in various emerging and developed markets as well as the general cycles of supply and demand.

These funds are below their trend lines right now, but if Citi’s forecasts prove to be correct, they may be worth keeping an eye on if you’re looking for broad commodity exposure in the future. Be sure to watch the trend lines and act accordingly.

  • PowerShares DB Agriculture (NYSEARCA:DBA)

  • ELEMENTS Rogers International Commodity Agri ETN (NYSEARCA:RJA)

  • iShares S&P GSCI Commodity-Indexed Trust (NYSEARCA:GSG)

  • Market Vectors RVE Hard Assets Producers (NYSEARCA:HAP)