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Best Commodity ETF UK

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Investing in commodities provides diversification opportunities for investors looking to add multiple asset classes in their portfolio. Some of the Popular Commodity ETFs UK invest in popular commodities like natural resources (crude oil and natural gas), precious and industrial metals (gold and silver), and agricultural goods.

In this guide, we review popular commodity ETF UK for 2022. We also give a step-by-step guide on investing in commodity ETFs in the sections below.

Commodity ETF UK 2022 List

Below, we bring you a list of some of the popular Commodity ETF UK in 2022. You can scroll down to get a detailed review of each of these exchange traded funds.

  1. iPath Bloomberg Commodity Index Total Return ETN
  2. SPDR Gold ETF
  3. Sprott Physical Silver Trust
  4. Aberdeen Standard Physical Palladium Shares ETF
  5. United States Oil Fund
  6. United States Gasoline Fund
  7. Invesco DB Agriculture Fund 
  8. SPDR S&P Oil & Gas Exploration & Production ETF
  9. Teucrium Corn Fund ETF
  10. Teucrium Wheat Fund ETF

Commodity ETFs UK Reviewed

For investors looking for a more detailed analysis on the popular Commodity ETFs available in the UK markets, we have reviewed 10 popular ETFs in the sections below.

  1. iPath Bloomberg Commodity Index Total Return ETN 

One possible way to reduce the volatility of commodity prices is through diversification and smart asset management. The iPath Bloomberg Commodity Index Total Return ETN provides that diversification. It invests in gold, natural gas, copper, silver, soybeans, WTI crude oil, corn, Brent crude, aluminum, and zinc. This ETN managed by Barclays tracks the performance of the Bloomberg Commodity Index Total Return Index. Note that ETNs are not ETFs. ETNs are debt instruments that give you payment upon redemption or maturity after deducting a fee.

While the diversification reduces the market risk of falling commodity prices, the iPath Bloomberg Commodity Index Total Return ETN bears the credit risk associated with the financial institution.

The ETN has recovered by around 30% in the last 12 months after falling 29% during the pandemic. As the economy recovers from the pandemic, the ETN’s performance is normalizing.

iPath bloomberg ETFThe overall commodity market is in a long-term bear and that is reflected in the ETN’s price, which has been declining since 2008.

  1. SPDR Gold ETF 

When thinking of investing in commodities, many investors may think about gold as a possible diversification opportunity. Investment advice dictates that gold prices rise as banks use gold reserves to print more money. Investors invest in gold to hedge their portfolios from a market crash. Historically, gold prices rose during the 2009-2011 period when the world recovered from the financial crisis. At that time, many banks went bust, and people found gold safer than currency.

Gold prices began rallying in 2020 as the road to recovery from the pandemic took off.

Holding physical gold through bullion bars and coins is inconvenient. It has the risk of theft, lacks flexibility, and entails a storage cost. The SPDR Gold ETF takes care of all these hassles and gives you exposure to its gold vault for as little as just $50 – or about £35.

SPDR gold etf

The ETF moves alongside the gold price. It rallied 38% between March 20, 2020, and August 7, 2020, when the pandemic created panic and investors fled to their safe-haven gold. As things started to stabilize from August, the ETF fell 15% from its peak.

While many investors are touting another market crash after the fiscal stimulus ends, it is difficult to time the market.

  1. Sprott Physical Silver Trust 

If you’re looking to gain exposure to the price of silver,  Sprott Physical Silver Trust is a popular commodity ETF in this industry. Investing in silver can offer protection against inflation and high liquidity to investors. Furthermore, the price of silver tends to rise in periods of economic volatility, making it a possible asset for recessions.

sprott physical silver ETF

The Sprott Physical Silver Trust invests all of its assets into silver bullion, meaning investors get direct exposure to the metal’s value. As such, this ETF removes the need to hold physical silver, which can present numerous logistical challenges. Furthermore, this ETF only charges an expense ratio of 0.62% per annum, which is pretty average for a silver ETF.

In terms of performance, this ETF has returned 44.37% and 14.18% in the last two years. In addition, the Sprott Physical Silver Trust has generated a positive return in four of the last five years, highlighting its consistency.

  1. Aberdeen Standard Physical Palladium Shares ETF 

Apart from popular precious metals like gold and silver, there are some lesser know precious metals like palladium. Palladium is largely used in the automotive, chemical, electrical, jewellery and dental industries. Around 75% of palladium produced is used in automobile catalytic converters and has huge demand in the world’s largest auto markets – ­the U.S and China. However, 80% of palladium supply comes from Russia and South Africa. The geopolitical conditions and automotive market drive palladium price.

Most auto stocks are surging on the back of electric vehicle (EV) momentum, and that is driving palladium to new highs. It has become a metal more expensive than gold and has achieved the status of a monetary metal.

Aberdeen Standard Physical Palladium Shares ETF

The Aberdeen Standard Physical Palladium Shares ETF is a popular Commodity ETFs for United Kingdom-based investors. It allows you to invest in physical palladium cost-effectively and conveniently.

As the ETF tracks palladium price, it is in a long-term bull, rising almost 380% between June 2016 and March 2021. It saw a dip of almost 30% on March 9, 2020, but quickly recovered (up 45%) on March 23, 2020. However, this year hasn’t provided the same returns, as the ETF has fallen by around 27% since the start of 2021.

The ETF has high future performance potential as the countries offer automotive industry subsidies to reduce CO2 emissions. This is driving EV sales, which will lead to higher demand for palladium. However, its biggest risk is lower trading volumes compared to gold and silver. Moreover, automakers are looking for an alternative to palladium. This is why, users should make sure to conduct their own research before investing in any ETFs.

5. United States Oil Fund 

Unlike precious metals, oil has a high application value. It is used to make gasoline, jet fuel, and petroleum products like plastics, medicines, ink, cosmetics, fertilizer, and asphalt. You can’t just go and purchase a barrel of oil but invest in oil through futures contracts. Like every commodity, demand and supply forces determine oil price. But the oil supply is partially controlled by OPEC.

Two main types of oil are Brent Crude, mainly found in Europe, and West Texas Intermediate (WTI), largely found in the U.S. These are used to make gasoline. The United States Oil Fund invests in oil futures to tracks WTI oil prices.

united states oil fund etf

In March 2020, when the pandemic halted world transportation, oil prices went negative as companies were paying to store oil. The OPEC asked its member countries to stop oil production to bring supply in line with demand. As the economy reopens, the oil price is rising. But demand from airlines, one of the biggest oil consumers, remains subdued amid international travel restrictions.

Hence, the United States Oil Fund surged 95% last year and is now nearing pre-pandemic levels. Currently, it is in a long-term bear as it did not recover from the 2009 financial crisis and the 2014 oil crisis.

6. United States Gasoline Fund

If you want to get exposure to gasoline prices, the United States Gasoline Fund is a popular Commodity ETF UK. It invests in futures and swaps to track gasoline prices. It gives you exposure to the gasoline variant of oil, which depends on the performance of the travel and transport industry.

united states gasoline fund

After falling 65% in March 2020, the United States Gasoline Fund surged threefold, returning to its pre-pandemic level. Although there was a dip since hitting all-time highs in October, the ETF seems to be on the road to recovery. The gasoline price could change as the US energy policy will reduce output, vaccine rollout will reopen the borders, and the pent-up demand for the holiday will boost travel.

  1. Invesco DB Agriculture Fund

One commodity ETF that gives exposure to the agriculture sector is the Invesco DB Agriculture Fund. As you may know, the agriculture sector involves the production of commodities such as grains, dairy, livestock, meat, and more. As such, agriculture ETFs will typically invest in one (or more) of these products to give investors exposure to price fluctuations.

invesco db agriculture fund

The Invesco DB Agriculture Fund invests in commodity futures, which essentially speculate on what the future price of an asset may be. In terms of asset composition, this ETF invests in contracts based on the price of soybeans, wheat, corn, coffee, live cattle, sugar, and more. Due to this, investors get diversified exposure to a wide range of commodities which reduces overall risk.

According to data from Yahoo Finance, this ETF is up over 25% in the year-to-date and is up over 30% since this date last year. This is impressive considering agricultural products tend not to produce as high returns as some other commodities. Finally, although the expense ratio is a little higher at 0.85% per annum, the convenience of this ETF allows you to invest in these agricultural products without having to own and store any physical assets.

  1. SPDR S&P Oil & Gas Exploration & Production ETF

One way of investing in commodities is through buying physical assets or futures. Another way is to purchase companies that produce and sell these commodities. The SPDR S&P Oil & Gas Exploration & Production ETF invests in oil and gas stocks listed in the US. This ETF UK is a bridge between stocks and commodities. It is not as volatile as oil price, but the ETF gains when the oil price rises. As it has exposure to mining companies, other factors also play a role in the ETF’s performance.

SPDR oil & gas ETF

The ETF surged 123% in the last one-year but fell around 35% in the last five years as the long-term bear nature of oil haunts the oil and gas stocks.

  1. Teucrium Corn Fund ETF 

Till now, we discussed hard commodities like metals and oil that are mined or extracted from the earth and can be stored for decades.

Soft commodities are grown like food grains, livestock, and other agricultural products. They are perishable, which brings a higher risk of storage. Their demand continues to grow as the world population increases, but it is the supply where the risk is. Uncertainties like weather and pathogens can impact their supply.

Given the high risk of supply and storage, soft commodities are more volatile than hard commodities. Hence, one way to get exposure to agricultural commodities is through ETFs. Corn is among the top three most widely produced agricultural commodities as it is used for human consumption, livestock feed, and ethanol production. One possible Commodity ETK UK for corn is the Teucrium Corn Fund ETF that has holdings in futures contracts diversified across multiple maturities.

teucrium corn fund etf

The Teucrium Corn Fund ETF has outperformed the broader stock market in the last 12 months, increasing by over 37% compared to the FTSE 100 index that surged 20.7%. The growth comes on the back of demand from China, where heavy rains have significantly impacted corn production. Housing the world’s biggest population, any food shortage in China will boost exports and reduce the leftover inventory.

  1. Teucrium Wheat Fund ETF

Wheat is the third most-produced soft commodity as it is a staple food in most countries. China and India are among the top two producers of wheat. During the pandemic, people took to baking while staying home. The consumption of staple food increased, driving the demand for wheat and creating a supply shortage. Stores started selling smaller packs of wheat flour.

teucrium wheat fund ETF

One way to get exposure to the rising wheat demand is the Teucrium Wheat Fund ETF. It has holdings in futures contracts diversified across multiple maturities. This commodity ETF UK has increased over 22% this year, with several dips and upcycles.

Are Commodity ETFs a Valuable Investment?

Commodity prices rise when inflation rises. But the sluggish economic growth in the U.S. and Europe, and a decline in China’s economic growth kept inflation in major global economies below 2%.

Inflation reduces your real income from stocks but increases income from commodities. The last time anybody made significant money in commodities was the 2009-2011 period when the economy recovered from the financial crisis.

The global economy is currently recovering from the pandemic crisis, because of which commodities are in an uptrend. However, it is important t remember that the demand can change in the short-term or the long-term. It is important for users to keep track of the possible ETFs they choose to invest in, and only enter the market after conducting their own research.

Commodity ETF UK Investment Platforms 2022

If you are interested in investing in Commodity ETFs, you may want to do so with a stock broker. Users may want to begin trading with stock brokerages that offer low fees on trading, multiple investment options and various tools & features to help support their investment process.

In the sections below, we review two stock brokers that allow users to trade Commoditty ETFs in the UK.

1. eToro 

etoro

eToro is the first broker to introduce social trading, which integrates social media with fintech to brings innovative trading solutions. Founded in 2007, the platform offers over 2,000 different financial assets on various exchanges, including the London Stock Exchange, Assets include stocks, ETFs, cryptocurrencies, indices, currencies, and commodities. With eToro, users can trade on these securities directly, through leverage, and short and long positions for a 0% commission.

Broker Chart 1

Features of eToro

eToro aims to make trading accessible to all by offering various investment options for newbies. You may do your research and see the social feeds where more than 20 million registered users of eToro’s global community discuss their investment strategy. You can also choose your favorite eToro trader and copy his/her investment strategy. Every time your favorite trader makes a trade, eToro makes a similar trade on your portfolio, and you benefit from his/her research. You can also invest in one of the eToro portfolios based on investing themes like 5G and cloud.

On eToro, you may also learn on the field, take eToro club membership, and access a dedicated Customer Success Agent and educational content like webcasts, investment newsletters, and more. As far as ETFs are concerned, users can start with a minimum investment of only $10.

Broker Chart 2

You can deposit funds on eToro with your UK debit card, credit card, bank account, or e-wallet. As it is denominated in US dollars, it charges a 0.5% currency conversion fee. But this charge is offset by its commission-free service. The platform is regulated by the Financial Conduct Authority (FCA) and the Financial Services Compensation Scheme (FSCS), giving you regulatory protection.

Stock Broker Minimum Deposit Fractional Shares? Pricing System Cost of Buying Stocks & ETFs Fees & Charges
eToro $10 Yes – $10 minimum 0% commission on ALL real stocks, spreads for CFDs Market spread is not included when buying real stocks No Deposit fees, $5 withdrawal fee, $10 inactivity fee, no account management fees.

Sponsored ad. 68% of retail investors lose money trading CFDs at this site

2. Capital.com 

Capital.comFCA-regulated Capital.com is well-suited for advanced traders who have experience in complex instruments like derivatives, margins, and spreads. It is a popular zero-commission CFD trading platform that allows you to long or short the popular Commodity ETF UK through CFD derivatives. Capital.com allows you to do margin trading with a leverage of up to 1:5. This means you put £100 and trade with up to £500.

Capital.com oil price table

Capital.com requires a minimum deposit of just £20. If you are a newbie, you may practice trading in some of the popular ETFs for UK investors on its demo account facility without any money. When you are confident, users can trade by depositing funds through debit/credit cards and e-wallets.

 

79.17% of retail investor accounts lose money when trading CFDs with this provider.

How to Purchase the Commodity ETFs UK

If users are looking to invest in Commodity ETFs in the UK, you should look to choose a suitable broker that can provide you with low fees, multiple stock options and additional tools & features.

After choosing your suitable broker, here is how you can begin the investment process.

Step 1: Open an Account

Head over to the homepage of your chosen broker and begin the account set-up process. You will be required to fill in your personal details – including your full name, email address and mobile number. Create a username and password for the platform to continue.

Step 2: Verification Process

Most reputable brokers in the UK are regulated by the FCA – which is why users may be required to verify their accounts. To do this, simply upload proof of ID (a copy of your driver’s license or passport) and proof of address (a copy of a bank statement or utility bill). Once these documents have been uploaded, your broker should verify them in a couple of minutes.

Step 3: Deposit funds

The next step is to deposit funds into your trading account. Most brokers may support 1 or more of the following payment methods:

  • Credit card
  • Debit card
  • Bank transfer
  • e-wallet

Choose your preferred payment option and deposit the funds into your account.

Step 4: Invest in Commodity ETFs

Once your account has been funded, proceed to search for any ETFs you wish to purchase on your platform’s search bar. Fill in the amount you want to credit into the trade, and confirm your transaction.

Conclusion

In summary, commodities may be used as a possible diversification strategy to add more asset classes in your portfolio. They are risky and significantly impacted by demand-supply and geopolitical events. This is why, users should carefully analyse any possible investment.

Frequently Asked Questions on Commodity ETFs

Are commodity ETFs a valuable investment?

How does a commodity ETF work?

What are some popula Commodity ETFs?

How do you get exposed to commodities?

Can a commodity ETF go to zero?

Alan Draper author check sign Pro Investor

Alan is the Chief Editor of the Buyshares sites and is responsible for ensuring all the content on our site is accurate, relevant and helpful. He is an experienced editor who has worked for several leading online publications. Alan is also a writer and is an expert on the stock market.

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