Commodity ETF

A commodity ETF gives investors exposure to commodities — raw materials like gold, silver, oil, natural gas, and agricultural products — without having to directly buy and store physical goods or trade futures contracts.

Types of Commodity ETFs:

Structure	Example	Tracks	Consideration
Physical-backed	GLD, SLV, IAU	Actual gold/silver stored in vaults	Closest to spot price
Futures-based	USO, UNG	Commodity futures contracts	Subject to contango/backwardation
Equity-based	XLE, GDX	Commodity producer stocks	Correlated but not identical to commodity
Broad commodity	DJP, GSG	Basket of multiple commodities	Diversified commodity exposure

Popular Commodity ETFs:

ETF	Commodity	Expense Ratio	Structure
GLD	Gold	0.40%	Physical
IAU	Gold	0.25%	Physical
SLV	Silver	0.50%	Physical
USO	Crude Oil	0.60%	Futures
DBA	Agriculture	0.85%	Futures

The Contango Problem (Futures-Based ETFs): Futures-based commodity ETFs face "contango" — when future-month contracts cost more than near-month. Rolling from expiring to more expensive contracts creates a persistent drag on returns. This is why USO (oil ETF) can lose money even when oil prices are flat.

Why Invest in Commodities:

1. Inflation hedge — commodities often rise with inflation
2. Portfolio diversification — low correlation to stocks/bonds
3. Geopolitical hedge — gold and oil respond to global events
4. Real asset exposure — tangible assets vs. financial assets

Tax Considerations:

• Physical commodity ETFs (GLD, SLV) are taxed as collectibles: 28% max capital gains rate
• Futures-based ETFs get 60/40 tax treatment (60% long-term, 40% short-term)
• Equity-based ETFs taxed like normal stock ETFs