ETF Talk: Will Commodities Start to Shine?

Commodities have had a volatile go of it in 2013. Yet the recent rebound in the global economy that, in part, led to the Fed’s decision to taper, means that commodities could be on the road to recovery in 2014. A commodities fund to keep an eye on for this possible future ascent is the iShares S&P GSCI Commodity-Indexed Trust (GSG).

As its name indicates, this fund is tied to the S&P GSCI Total Return Index; GSG seeks investment results which generally correspond, before fees and expenses, to the performance of that index. The index itself holds long positions in commodities futures contracts.

As previously mentioned, commodities have not done well this year. In a volatile 2013, as shown by the chart below, GSG has fallen 1.22%. However, this fund recently has experienced a slight rise from a November trough, indicating that it does have potential for future growth.

Since this ETF follows the results of an index, it does not allocate any of its assets to specific sectors or market-traded stocks. Instead, the fund relies on futures contracts to generate its returns.

If the economy improves, and as the Fed continues to taper in 2014, commodities may rebound. If they do, a way to capitalize on their rise could be the iShares S&P GSCI Commodity-Indexed Trust (GSG).

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