Commodity ETF Performance Tracker 2024-2025: Analyze Top Performing ETFs like FGDL, UNG, & GLDM for Gold, Silver & Oil Inflation Hedge & Diversification
Commodity ETF Performance Tracker 2024-2025: Analyze Top Performing ETFs like FGDL, UNG, & GLDM for Gold, Silver & Oil Inflation Hedge & Diversification
Key Takeaways
- Gold ETFs dominated performance in 2024-2025 with FGDL and GLDM delivering over 35% returns as investors sought inflation hedges amid economic uncertainty .
- Natural gas ETFs showed extreme volatility with UNG posting impressive 3-year gains but struggling with recent negative performance due to supply factors and weather conditions .
- Commodity ETFs provide diversification benefits but require careful selection based on expense ratios, liquidity, and underlying assets to avoid concentration risks .
- Expert insight suggests continued commodity strength due to structural supply constraints, low inventories, and ongoing inflation pressures, though short-term pullbacks are likely .
1. What Are Commodity ETFs and Why They Matter for Your Portfolio
Commodity ETFs are exchange-traded funds that invest in physical commodities like gold, oil, natural gas, or agricultural products. These funds gives investors exposure to commodity prices without needing to actually store physical barrels of oil or gold bars themselves. They work by either holding the physical commodity (like gold ETFs do) or through futures contracts that track commodity prices. For most investors, this is way more practical than trying to invest directly in commodities markets, which can be complex and require specialized knowledge.
The real value of commodity ETFs comes from their diversification benefits. Traditional portfolios heavy on stocks and bonds can benefit from adding commodities because they often move differently than financial assets. When inflation spikes or geopolitical tensions emerge, commodities tend to hold their value better than stocks. This year alone, commodities have outperformed both the S&P 500 and bonds, with silver up 29.6%, gold up 15.1%, and industrial metals up 17.7% through May . Thats pretty impressive compared to the 11.8% return of the S&P 500 over the same period.
Another key advantage is inflation protection. Commodities are real assets with inherent value, and their prices typically rise when inflation accelerates. This makes them an effective hedge against the declining purchasing power of cash. With inflation remaining stubborn in many economies and government debt at levels not seen since World War II, this protection has become increasingly valuable to investors . Gold specifically has historically maintained it's value during inflationary periods, which explains it's strong performance recently.
Table: Comparative Performance of Commodities vs. Traditional Assets (YTD 2024)
Liquidity is another big advantage. ETFs trade like stocks on major exchanges, meaning you can buy and sell them throughout the trading day at market prices. This is far easier than trying to trade physical commodities or futures contracts directly. The best-known commodity ETFs have high trading volumes and narrow bid-ask spreads, making them cost-effective to trade for most investors. For example, GLDM trades over 500,000 shares daily with a median bid-ask spread of just 0.02% .
2. The Best Performing Commodity ETFs of 2024-2025
The top performing commodity ETFs over the past year have been dominated by precious metals, particularly gold. Topping the list is Franklin Responsibly Sourced Gold ETF (FGDL) with an impressive 39.02% one-year return . This ETF stands out for it's focus on responsibly sourced gold, which has resonated with investors increasingly concerned about environmental and governance factors in their investments. Right behind is USCF Gold Strategy Plus Income Fund (USG) with a 24.19% return, employing a strategy that combines gold exposure with income generation techniques.
The SPDR Gold MiniShares Trust (GLDM) has delivered strong performance with a 38.88% one-year return . What makes GLDM particularly attractive is it's low expense ratio of just 0.10%, which is among the lowest in the gold ETF space . This cost efficiency has helped it outperform many competitors over the longer term, with a 26.28% three-year annualized return . For investors looking to maximize their gold exposure while minimizing costs, GLDM has become a preferred choice.
Beyond single commodity funds, broad commodity strategies have also performed well. The Simplify Commodities Strategy No K-1 ETF (HARD) has delivered 18.48% returns, while the USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCI) returned 16.30% . These funds use sophisticated methodologies to dynamically allocate across multiple commodities based on market conditions, providing diversified exposure without the complexity of managing individual commodity positions.
Table: Top Performing Commodity ETFs (1-Year Returns)
Performance across the commodity space hasn't been uniform though. While precious metals have soared, other commodities have struggled. The United States Natural Gas Fund (UNG) has seen mixed performance with strong three-year returns of 53.38% but negative recent performance, down -23.68% year-to-date . This volatility highlights the importance of understanding the different drivers affecting various commodities - from weather patterns affecting natural gas demand to industrial production affecting metals.
The outperformance of gold ETFs specifically reflects several factors beyond just inflation concerns. According to State Street's 2024 Gold ETF Impact Study, 84% of high net worth gold ETF investors reported that these investments improved their overall portfolio performance . Additionally, 76% of financial advisors now recommend gold allocations to clients, with most suggesting allocations of 10% or more. This professional endorsement has contributed to strong flows into gold ETFs despite rising interest rates.
3. Gold ETFs: Your Best Inflation Hedge? A Close Look at FGDL and GLDM
Gold has historically been the go-to commodity for inflation protection, and the recent performance of gold ETFs has reinforced this status. The Franklin Responsibly Sourced Gold ETF (FGDL) and SPDR Gold MiniShares Trust (GLDM) represent two of the best options available, each with slightly different approaches to gold exposure. FGDL has distinguished itself by focusing on responsibly sourced gold, appealing to investors who care about environmental and social governance factors. With $233 million in assets, it's smaller than some competitors but has delivered superior returns .
GLDM takes a different approach, competing primarily on cost efficiency. With an expense ratio of just 0.10%, it's one of the cheapest ways to gain exposure to physical gold . The fund holds physical gold bars stored in secure vaults, and each share represents a fractional ownership interest in these bars. This structure provides direct exposure to gold prices without the complexities of futures-based strategies that can suffer from contango or rolling costs. The fund has grown to over $17 billion in assets, reflecting it's popularity with cost-conscious investors .
The performance of both funds has been strong, but slightly different. FGDL has delivered a 31.18% YTD return and 37.74% one-year return , while GLDM has posted 31.56% YTD and 37.93% one-year returns . The minor differences reflect variations in timing, expenses, and the specific gold holdings each fund maintains. Both have significantly outperformed the broader commodity category average of 13.31% YTD and 14.77% one-year returns, demonstrating gold's exceptional strength during this period.
Here's what makes gold ETFs particularly effective as inflation hedges. Gold maintains it's purchasing power over long periods because it's value isn't tied to any particular currency or government. When currencies weaken due to inflation or other factors, gold priced in those currencies tends to rise. This dynamic has been particularly evident recently with persistent inflation concerns and expanding government debt levels creating uncertainty about future purchasing power.
Expert insight: The current gold market is being driven by more than just inflation fears. According to analysis from State Street, investors have been underweight commodities despite relatively low inventories and strong structural demand factors . Gold ETF holdings are actually at similar levels to 2019, meaning that despite the price appreciation, there hasn't been massive speculative inflow that might suggest a bubble. This indicates that gold could have further room to run, especially if the Federal Reserve begins cutting rates as expected.
4 Natural Gas and Energy ETFs: Understanding UNG's Rollercoaster Ride
The United States Natural Gas Fund (UNG) exemplifies both the potential rewards and risks of commodity ETF investing. UNG seeks to track the daily price movements of natural gas by investing primarily in natural gas futures contracts traded on the NYMEX . Unlike physical gold ETFs, UNG doesn't hold actual natural gas - instead, it uses futures contracts to gain exposure. This creates additional complexities that investors must understand.
UNG's performance has been a rollercoaster. The fund has delivered an impressive 53.38% three-year return, showcasing it's potential during periods of rising energy prices . However, it's also posted a -23.68% YTD return through August 2025, highlighting the volatility inherent in energy markets . This kind of performance whipsaw can test the resolve of even seasoned investors, making natural gas ETFs more suitable for those with strong risk tolerance.
Several unique factors affect UNG's performance beyond just natural gas prices. The fund must continuously "roll" it's futures positions - selling expiring contracts and buying longer-dated ones to maintain exposure. When the market is in contango (future prices higher than spot prices), this rolling process creates a drag on returns as the fund sells low and buys high each month. Conversely, when the market is in backwardation (spot prices higher than futures), the roll can actually boost returns. This structural factor explains why UNG can underperform the spot price of natural gas over time.
Table: UNG Key Facts and Performance Metrics
The fundamental drivers of natural gas prices include weather patterns (especially winter heating demand and summer cooling demand), production levels, storage inventory levels, and increasingly - LNG export demand. The unusual weather patterns in 2024, including a mild winter in many regions, contributed to weaker-than-expected demand and rising inventories, putting downward pressure on prices. Meanwhile, production has remained robust despite earlier expectations of declines.
From an expert perspective, energy ETFs like UNG may be poised for a rebound. According to analysis from Aberdeen Investments, investors remain significantly underweight oil and gas investments compared to historical averages . Money managers' positioning in West Texas Intermediate oil futures is well below the 10-year average, suggesting that if sentiment improves, there could be substantial buying pressure. Additionally, geopolitical risks in the Middle East and elsewhere aren't fully priced into current energy prices, creating potential upside catalyst.
For investors considering UNG or similar energy ETFs, it's crucial to understand that these are typically tactical instruments rather than long-term buy-and-hold investments. The structural costs of rolling futures contracts and the volatility of energy markets make them better suited for shorter-term positions based on clear market thesis about energy price direction. Position sizing becomes particularly important with such volatile instruments.
5. Beyond Gold and Gas: Silver, Copper, and Oil ETFs Performance
While gold and natural gas have grabbed headlines, other commodities have delivered strong performance with different risk-return characteristics. Silver has been the standout performer, rising 29.6% year-to-date through May 2024 . This makes it the best-performing major commodity, outperforming even gold. Silver's dual role as both precious metal and industrial commodity gives it unique characteristics - it benefits from safe-haven demand like gold, but also from industrial demand in solar panels, electronics, and other applications.
Copper has also delivered strong returns, with the Bloomberg Industrial Metals Index (which includes copper, aluminum, zinc, nickel, and lead) up 17.7% year-to-date . Copper's performance reflects it's critical role in the energy transition - it's essential for electricity transmission, electric vehicles, and renewable energy infrastructure. Unlike some commodities that might see demand destruction at high prices, copper has limited substitutes in many applications, giving it relative demand stability even at elevated price levels.
Oil ETFs have shown more mixed performance compared to metals. While spot oil prices have seen some strength, this hasn't always translated directly to ETF performance due to the structural issues with futures-based strategies. The United States Oil Fund (USO) is the largest oil ETF, but many broader commodity ETFs also have significant oil exposure. The energy transition creates a complex outlook for oil - near-term demand remains robust, but long-term uncertainties create volatility.
The performance divergence between industrial and precious metals reveals interesting market dynamics. Industrial metals like copper are more sensitive to economic growth expectations, particularly in China, which accounts for more than 50% of commodity demand excluding energy . Precious metals like silver and gold are more sensitive to monetary policy and inflation expectations. Recently, silver has benefited from both narratives - it's precious metal characteristics supported by inflation concerns, and it's industrial characteristics supported by energy transition investments.
Here's an expert insight many investors miss: copper supply constraints are structural rather than cyclical. The process of bringing new copper mines online takes many years, and recent underinvestment in mining capacity means supply may struggle to keep pace with demand, particularly from electrification trends. This has led to attempts to grow through consolidation, such as BHP's proposed takeover of Anglo American, which would create the mining sector's largest merger deal . These structural factors support longer-term price strength.
For investors looking beyond gold and gas, several ETFs provide exposure to these other commodities. The iShares Silver Trust (SLV) is the largest silver ETF, while the Global X Copper Miners ETF (COPX) provides exposure to copper mining companies. Broader commodity ETFs like the Invesco DB Commodity Index Tracking Fund (DBC) offer diversified exposure across multiple commodity sectors. Each of these approaches has different risk characteristics, costs, and tax implications that should be carefully considered.
6. What's Driving Commodity ETF Performance: Expert Market Analysis
Several key factors have been driving commodity ETF performance in 2024-2025, and understanding these drivers is essential for evaluating future prospects. The primary driver has been inflation persistence despite central bank efforts to control it. Commodities have traditionally served as effective inflation hedges, and with inflation remaining above central bank targets in many economies, investors have allocated to commodities as protection against purchasing power erosion.
Supply constraints across multiple commodity sectors have contributed to price strength. Industrial metal inventories on the London Metal Exchange were at 25-year lows in January 2024, and while they've recovered slightly, they remain well below historical averages . Similarly, gold mining production has been relatively stagnant while demand has increased from both investors and central banks, particularly in emerging markets. These supply-demand imbalances create fundamental support for prices.
Geopolitical factors have played a significant role in commodity markets. Conflicts in the Middle East have created periodic risk premiums in oil prices, though interestingly, Aberdeen Investments notes that oil prices have "little geopolitical risk priced in" despite escalating tensions . Other geopolitical factors including sanctions on various commodity-producing countries and trade restrictions have disrupted supply chains and created arbitrage opportunities that have affected prices.
Monetary policy expectations have particularly influenced precious metals. Gold's strong performance might seem counterintuitive given rising interest rates, which typically make non-yielding assets like gold less attractive. However, the expectation that rate hikes would soon pause and then reverse has supported gold prices. According to analysis, "ETF sentiment may improve once the Federal Reserve starts cutting rates" , suggesting that monetary policy normalization could provide further support.
The structural underinvestment in commodity production capacity represents a crucial longer-term factor. After the commodity supercycle ended around 2014, investment in new mines, oil fields, and production infrastructure declined significantly. This underinvestment has created capacity constraints that can't be quickly reversed, as developing new resource projects takes many years. Additionally, increasing environmental and regulatory hurdles have extended development timelines and increased costs for new projects.
From a technical perspective, investor positioning has created opportunities. According to market analysis, investors had been "underweight commodities after they were disappointed at the level of China's stimulus measures in 2023" . This underpositioning meant that even modest improvements in demand or supply disruptions could trigger significant price moves as investors rushed to increase exposure. The data shows that while positioning has increased for some commodities like copper, it remains light for others like oil, suggesting potential for further inflows.
7. How to Invest in Commodity ETFs: A Practical Guide
Investing in commodity ETFs requires a different approach than investing in stock or bond ETFs. The first step is understanding the different types of commodity ETFs available. Physical commodity ETFs like GLDM actually hold the physical commodity, typically in secured vaults. Futures-based ETFs like UNG use derivatives contracts to track prices. Equity-based ETFs hold shares of companies involved in commodity production, like mining or energy companies. Each approach has different risk characteristics, tax implications, and costs.
Expense ratios are particularly important for commodity ETFs because they can vary significantly. Physical gold ETFs like GLDM charge as little as 0.10% , while futures-based strategies often charge 0.60-1.00% or more due to the additional complexity and trading costs involved . These higher expenses create a drag on performance that must be overcome before investors see positive returns. Always check the expense ratio and understand what it includes - some funds may have additional costs not reflected in the stated ratio.
Tax treatment represents another crucial consideration. Physical gold ETFs are typically classified as collectibles for tax purposes, which means long-term gains are taxed at a maximum rate of 28% rather than the standard 20% for most securities. Futures-based ETFs often use a blended tax rate that includes 60% long-term and 40% short-term capital gains treatment, regardless of holding period. These tax differences can significantly impact after-tax returns and should influence which ETFs are held in which account types.
Table: Commodity ETF Selection Checklist
Implementation matters for commodity ETF investing. Rather than making large lump sum investments, consider dollar-cost averaging to build positions gradually. This approach helps mitigate the volatility inherent in commodity markets. Similarly, position sizing should be conservative - most experts recommend allocating 5-10% of a portfolio to commodities as part of a diversified allocation . Overallocating can increase portfolio volatility beyond comfortable levels for most investors.
Monitoring and rebalancing commodity ETF positions is more important than with traditional assets. Commodity markets can experience sharp moves in both directions, causing allocations to drift from target weights. Establishing predetermined rebalancing thresholds (for example, rebalancing when allocation deviates more than 25% from target) helps maintain consistent risk exposure. This disciplined approach also naturally forces investors to sell when prices are high and buy when prices are low.
Finally, understand what you own and why you own it. Commodity ETFs should serve specific purposes in a portfolio - whether as inflation hedges, diversification tools, or tactical positions based on market views. Each commodity has different drivers and characteristics, so blanket "commodity" exposure might not achieve specific investment objectives. Having a clear thesis for each commodity position helps investors stay disciplined during periods of volatility or underperformance.
8. Risks and Considerations: What the Headlines Don't Tell You About Commodity ETFs
While commodity ETFs offer attractive benefits, they also come with unique risks that often don't get highlighted in promotional materials. Contango risk is perhaps the most misunderstood danger for futures-based ETFs. When markets are in contango (forward prices higher than spot prices), ETFs must sell expiring contracts at lower prices and buy longer-dated contracts at higher prices, creating a persistent drag on returns. This effect can cause ETFs to significantly underperform the spot price of the commodity over time.
Liquidity risk can emerge even in seemingly large ETFs. While the primary ETF shares might trade with tight spreads, the underlying futures or physical markets might experience liquidity disruptions during periods of stress. During the 2020 oil price collapse, some oil ETFs faced challenges rolling contracts because of market dislocations. Similarly, physical gold ETFs depend on the liquidity of the gold market, which generally remains robust but can experience temporary disruptions.
Concentration risk is another often-overlooked factor. Many commodity ETFs focus on single commodities, creating concentrated exposure to specific market dynamics. Even diversified commodity ETFs might be heavily weighted toward a few commodities like oil or gold. This concentration means that adverse developments affecting that specific commodity can significantly impact the ETF's performance, unlike broadly diversified stock ETFs where individual company risk is minimized.
Regulatory risks represent a less apparent but potentially significant concern. Commodity markets are subject to complex regulations that can change in ways that affect ETF operations. Position limits on futures contracts, changes in tax treatment, or alterations to how commodities can be stored or transported could all impact ETF performance. These regulatory risks are difficult to predict and can emerge suddenly in response to market developments or political changes.
The hidden costs beyond expense ratios can erode returns. Futures-based ETFs incur transaction costs each time they roll contracts, and these costs aren't always fully reflected in the expense ratio. Physical ETFs have costs associated with storing and insuring the commodities, though these are typically included in the expense ratio. Additionally, bid-ask spreads represent a hidden cost that can be significant for ETFs with lower trading volumes.
Behavioral risks might be the most underestimated challenge. Commodity ETFs can experience extended periods of underperformance followed by sharp rallies. Investors who chase performance after strong runs may buy at peaks and then panic-sell during inevitable corrections. The volatility of commodity ETFs requires emotional discipline that many investors lack. Understanding historical patterns and having realistic expectations about volatility can help investors maintain appropriate perspectives during both strong and weak performance periods.
Finally, understand that past performance truly doesn't guarantee future results in commodity markets. The factors driving commodity prices change over time, and today's best-performing commodity might be tomorrow's worst. The structural shifts toward renewable energy and electrification create uncertain long-term demand patterns for various commodities. While diversification across multiple commodities can help, it doesn't eliminate the risk that broad commodity exposure might underperform other asset classes over specific periods.
Frequently Asked Questions
What's the difference between commodity ETFs and commodity ETNs?
Commodity ETFs actually hold assets - either physical commodities or futures contracts. Commodity ETNs (exchange-traded notes) are unsecured debt obligations of the issuer that promise to pay the return of a commodity index. ETFs have counterparty risk limited to their holdings, while ETNs have credit risk exposure to the issuing institution. Most investors prefer ETFs for this reason, as they provide direct ownership of assets rather than exposure to issuer creditworthiness.
How do taxes work for commodity ETFs?
Tax treatment varies by ETF structure. Physical gold ETFs are typically taxed as collectibles, with long-term gains up to 28%. Futures-based ETFs use the 60/40 rule - 60% of gains are treated as long-term regardless of holding period, 40% as short-term. This complexity means it's wise to consult a tax professional about your specific situation. Some investors hold commodity ETFs in tax-advantaged accounts to simplify tax reporting, though this doesn't eliminate eventual tax liabilities upon withdrawal.
Can commodity ETFs really protect against inflation?
Historically, commodities have been among the most reliable inflation hedges, as their prices tend to rise when inflation accelerates. However, the protection isn't perfect or instantaneous. Some commodities work better than others - precious metals like gold have historically been more reliable inflation hedges than industrial commodities, which can be affected by demand factors unrelated to inflation. Also, futures-based ETFs may not provide perfect inflation protection due to structural factors like contango.
Why does my natural gas ETF seem to underperform spot prices?
Futures-based ETFs like UNG often underperform spot prices due to contango and rolling costs. When the market is in contango (forward prices higher than spot), the ETF must sell expiring contracts at lower prices and buy longer-dated contracts at higher prices each month. This creates a persistent drag on returns that can cause significant underperformance versus spot prices over time. During periods of prolonged contango, this effect can be substantial, making futures-based ETFs better for shorter-term positions than long-term holdings.
How much of my portfolio should be in commodity ETFs?
Most financial advisors suggest 5-10% allocation to commodities for diversification and inflation protection purposes . The exact percentage depends on your risk tolerance, investment timeline, and overall portfolio composition. Conservative investors might allocate less, while those more concerned about inflation or wanting more tactical exposure might allocate more. It's generally not recommended to exceed 15% allocation unless you have specialized knowledge of commodity markets, as the volatility can overwhelm other portfolio elements.