China Powers Base Metals
After palladium, the next-best-performing commodity is another metal—copper—which hit a two-year high at the end of July. Exchange-traded products such as the iPath Pure Beta Copper ETN (CUPM), the iPath Bloomberg Copper Subindex Total Return ETN (JJC) and the United States Copper Index Fund (CPER) gained between 13.5% and 14.5% this year.
Powering copper’s ascent has been a potential ban by China on imports of scrap metal, scrap wire and scrap motor starting in 2018. China hopes the move will reduce pollution, but it would also decrease the supply of scrap copper in the country, and increase the demand for other forms of copper, such as refined and concentrate.
Copper isn’t the only metal getting a boost from China. Aluminum jumped to a two-year high this summer, leading the iPath Bloomberg Aluminum Subindex Total Return ETN (JJU) to an 11.4% gain.
China will launch an investigation into the illegal expansion of aluminum capacity, according to a Reuters report, potentially reducing supply.
“This is all about the looming cutback to Chinese supply growth, due to both the current investigation into illegal capacity, and in the medium to longer term, the expected slowdown in Chinese capacity growth,” Julius Baer analyst Carsten Menke told Reuters. “Demand is not the issue—it’s all about supply.”
Gold Still In Demand
Rounding out the list of the 10 top-performing commodities is an investor favorite, gold. There are three ETFs tied to the yellow metal on the list, including the iShares Gold Trust (IAU), the ETFS Physical Swiss Gold Shares (SGOL) and the SPDR Gold Trust (GLD), each with gains of just over 10%.
Gold prices remain supported by persistently low global bond yields, which reduce the opportunity cost of holding the metal, which is widely regarded as a safe haven. Investors continued to add to their gold ETF holdings, with 109.1 metric tons coming into the space during Q1, according to the World Gold Council.
At the same time, central banks added 76.3 metric tons to their stockpiles. Both figures are down from last year, but suggest there’s still a healthy demand for gold from all segments of the market, despite surging stock markets around the world.
For a full list of this year’s top-performing commodity ETFs, see the table above.