In recent months, as the U.S. stock market rally has shown signs of strain, some of the largest commodity funds in the market have started to gain momentum. For example, as of April 5, the SPDR GLD Shares ETF (GLD) had seen a 7.9% increase over the past month and was trading at record highs. The iShares Silver Trust (SLV) had also seen a significant 12% increase, while the United States Oil Fund LP (USO) had gained 11.2%. This surge in commodity prices has also been reflected in equity funds closely tied to these commodities, particularly those that invest in gold and silver miners. Additionally, some agricultural commodities that are typically less in the spotlight, such as cocoa, have experienced a surge in prices.
The rise in commodity prices can be attributed to various factors. For instance, commodities like cocoa and orange juice futures are influenced by supply-demand dynamics, which are impacted by factors such as weather conditions and production issues. On the other hand, commodities like oil and gold are influenced by geopolitical issues, particularly conflicts in the Middle East and Europe, which could potentially lead to supply disruptions and drive prices higher. It is important to consider the unique drivers behind each commodity’s price increase and not generalize the reasons for the entire commodity market rally.
Gold’s Record Highs and Investor Behavior
Although gold prices have reached record highs, it is not solely due to retail investors seeking safe-haven assets. Surprisingly, five of the six largest gold ETFs have actually seen outflows this year, totaling nearly $3 billion. The main sources of gold buying appear to be foreign central banks and hedge funds, with the latter betting on Federal Reserve rate cuts, which historically have a positive impact on gold prices. This highlights the complexity of investor behavior and the diverse factors influencing commodity markets beyond retail investment trends.
Looking ahead, it is worth considering which commodities could potentially rally next. For example, Abrdn’s Physical Precious Metals Basket Shares ETF (GLTR) has seen an increase of over 8% in the past month. The fund holds a mix of gold, silver, platinum, and palladium. With platinum and palladium playing key roles in hybrid vehicles, there could be a surge in demand for these metals as automakers shift focus from electric cars to hybrids. Additionally, palladium, which has experienced a considerable drop since its peak in early 2022, could be due for a rally, especially considering the strong demand and emerging supply issues in the market.
In addition to precious metals, there are opportunities in agricultural commodities as well. Teucrium offers several ETFs focused on agricultural commodities that have seen an increase in prices over the past month. For example, the Teucrium Soybean Fund (SOYB) has risen by over 3%. Companies are also starting to explore alternative uses for soybeans, such as renewable energy, which could potentially drive additional demand in the future. It is important to analyze and understand the various factors influencing commodity prices and to consider the potential for growth and innovation in different sectors of the commodity market.