Every single broad-market commodity ETF is down in the year-to-date period through July. Losses range from less than 1% for the ETRACS UBS Bloomberg Constant Maturity Commodity Index TR ETN (UCI) to 9.5% for the GS Connect S&P GSCI Enhanced Commodity TR Strategy ETN (GSC).
In many cases, individual commodities are doing even worse than the broad indices suggest. The most widely followed commodity in the world, crude oil, is down about 6.6% through the end of July, fueling a 12.3% loss for the United States Oil Fund (USO).
All that said, this isn’t a story about how bad commodities are doing. That’s because they aren’t doing all that bad—at least compared with the bloodbath in 2014 and 2015.
Commodities need to be looked at in the context of cycles, and if 2016 was a year of across-the-board recovery from extremely oversold levels, 2017 is shaping up to be a year of moderation, with traders being more discerning about which commodities to buy and sell.
Even though many commodities have pulled back this year, plenty have climbed higher. Those are the commodities we’ll highlight here.
Palladium At 16-Year High
At the top of the heap is a precious metal that’s used primarily as an autocatalyst in gasoline vehicles—palladium. The ETFS Physical Palladium Shares (PALL), with its 31% gain for the year, is far and away the top-performing commodity ETF of the year.
Earlier this summer, palladium prices reached as high as $917/oz, which is the richest price since 2001. Sister-metal platinum now trades at a mere $50 premium to palladium, compared with an average premium of $775 over the past decade.
Industry authority Johnson Matthey estimates the supply deficit in the palladium market may leap from 163,000 ounces last year to 792,000 ounces this year.
“World automotive demand is forecast to exceed 8 million autos for the first time, with further growth in world gasoline car production and tighter emissions legislation in China, Europe and North America,” wrote the firm in a recent report.