Definition
Commodity ETFs offer exposure to gold, oil, agriculture, and other commodities without direct physical ownership or futures trading. Physical-backed ETFs (gold, silver) hold actual metal in vaults. Futures-based ETFs roll monthly contracts, introducing roll yield (positive in backwardation, negative in contango). Commodity ETFs provide inflation protection and portfolio diversification.
lightbulb Example
A gold ETF backed by physical gold stored in London vaults provides direct gold price exposure at 0.40% expense ratio. Unlike futures-based oil ETFs that suffer contango losses, physical gold ETFs track spot prices closely.
verified_user Key Points
- Physical-backed vs futures-based structures
- Futures roll yield can help or hurt returns
- Provides inflation protection and diversification
- Tax treatment varies by commodity and structure