Commodities May Soar in '24, Bringing Invesco ETF Along

Commodities May Soar in '24, Bringing Invesco ETF Along

Invesco's energy-heavy DBC may ride a bullish trend in raw materials and commodity ETFs.

Reviewed by: Sean Allocca
Edited by: Ron Day

After taking a pummeling in the early days of the pandemic, commodity prices exploded thanks to the tidal wave of central bank liquidity and a tsunami of government stimulus. 

Those inflationary seeds bloomed in the raw materials asset class. The Invesco DB Commodity Index Tracking Fund (DBC) rose 194% from a $10.41 per share low in early 2020 to a $30.64 peak in June 2022. Since the June 2020 high, DBC has trended lower, and the price reached a bottom in May 2023.  

DBC was trading at over $25 per share this month, and the path of least resistance has turned higher.  

DBC reflects an index of 14 commodities, using futures to create exposure. The fund manager considers the shape of the futures curve to select the commodity futures to minimize contango risk or the cost of rolling from one futures delivery month to the next.  

Invesco’s DBC May Surge on Bullish Commodities Trent 

Contango and backwardation are terms commodity traders use to describe the shape of the forward curve in futures and forward markets. Contango reflects progressively higher prices for future delivery, incorporating interest rates, storage, and insurance. Contango suggests supply and demand equilibrium or nearby oversupply. The higher deferred prices signal that production will decline, causing tightening future fundamentals. 

Backwardation exists when prices for deferred delivery are progressively lower than for nearby delivery, suggesting a nearby supply shortage. The lower future prices suggest producers will increase output to alleviate the shortages, pushing prices lower. The crude oil and oil products futures market are in backwardations. The backwardations in energy futures markets favor DBC. 

DBC: Heavily Weighted in Energy 

Since the Invesco DB Commodity Index Tracking Fund holds nearly one-quarter of its assets in oil and product futures contracts, rolling from one contract to the next involves selling at a higher price and buying at a lower price when shifting the risk along the futures curve. At $25.62 per share on Sept. 14, DBC had $2.20 billion in assets under management. DBC is a highly liquid product, with over 750,000 shares changing hands daily. DBC charges a 0.87% management fee. DBC is highly sensitive to traditional energy prices, which reached lows in May.  

Nearby WTI and Brent crude oil prices fell to $63.57 and $68.20 per barrel in May 2023. At $90.32 and $93.77 on Sept. 14, prices have increased by 42% and 37.5% over the past four months, supporting gains in DBC. 


The chart highlights DBC’s 16% rise from the 2023 $22.05 low in May to the $25.62 level on Sept. 12. Since DBC also holds other commodity futures, including metals and agricultural products, declines in those markets caused DBC to underperform the oil and oil product futures markets. However, the trend since the May low remains bullish in mid-September 2023.  

Why Commodity ETFs Might Soar Next Year 

The following reasons support higher commodity prices in 2024: 

  • Rising interest rates have stemmed inflation, but the Fed may not achieve its 2% target because of the turbulent geopolitical landscape.  
  • Rates will not likely rise at the same trajectory witnessed from March 2022 through this month over the coming year.  
  • Markets will adjust to the higher rate environment, and stable rates should take upward pressure off the U.S. dollar. The dollar is the pricing mechanism for most commodities, and a stronger dollar tends to be bearish for raw material prices. A stable to weaker dollar could support higher commodity prices.  
  • Commodities have been in bull markets since the 2020 pandemic-inspired low. The bullish trend is always your best friend in markets.  

Markets reflect the economic and geopolitical landscapes. Since raw materials are global markets, essential commodities’ supply and demand fundamentals are highly sensitive to the turbulent environment.  

PDBC: Alternative That Requires No K-1 

Investors in DBC receive a K-1 tax form for business partnerships that report gains and losses in futures contracts. Invesco offers a similar product, the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC), reflecting commodity prices without owning specific futures contracts that do not require a K-1 form. At $15.35 per share on September 14, PDBC had $5.56 billion in assets under management. PDBC trades over 3.3 million shares daily and charges a 0.59% management fee. DBC and PDBC moved 16% higher since the May 2023 low.  


The Fund Flows Toll shows $122 million has flowed out of DBC since late April.  


The Fund Flows Toll shows only $83.35 million has flowed out of PDBC since late April. PDBC’s outflows are lower than DNC’s, given PDBC’s larger assets under management.  

Inflation may have bottomed after the Fed’s aggressive monetary policy tightening. Meanwhile, the path of least resistance of commodity prices incorporates the geopolitical landscape, which remains very bullish. 

Andrew Hecht is a Nevada-based writer and analyst covering stocks, bonds, foreign exchange, cryptocurrency and raw material markets. He has over four decades of experience in markets across all asset classes, concentrating on commodity markets. Hecht was a senior trader at Salomon Brothers in the 1980s and 1990s, running sales and trading businesses. In 2013, McGraw Hill published his book, “How to Make Money in Commodities."