Commodity ETF
A commodity ETF is an designed to track the price of a physical commodity, such as gold, oil, or agricultural products, or a basket of several commodities together. It lets investors gain exposure to commodity prices through a normal , without needing to buy, store, or insure the physical commodity itself.
Commodity ETFs get their exposure in one of two main ways. Some hold the physical commodity directly, which is common for precious metals like gold and silver that are relatively easy and cheap to store. Others, especially for commodities like oil or natural gas that are impractical to store in bulk, use instead, regularly rolling from an expiring contract into a later dated one to maintain continuous exposure.
based commodity ETFs can behave differently from the commodity's actual spot price over time because of the cost or benefit of rolling contracts forward, an effect known as or depending on the shape of the curve. This means a based commodity ETF's long-term return can diverge noticeably from simply holding the physical commodity, even when the underlying commodity's spot price is flat, which is an important detail for anyone holding one of these funds for more than a short period.