Industrial metals have emerged as the strongest sector in the past quarter, showing positive performance and setting the stage for potential continued rally in commodity prices. The UBS Constant Maturity Commodity Index (CMCITR) outperformed the Bloomberg Commodity Index (BCOM), showcasing a 7.17% return year-to-date compared to 5.14% by the BCOM.
CMCITR’s success in Q2 was attributed to its roll yield maintenance, which outperformed BCOM in a flat roll yield environment. The industrial metals sector particularly stood out with total returns of around 9%, led by copper and zinc, which increased by 10% and 21% respectively. While the energy sector also saw gains, the agriculture sector faced decline due to lower prices in corn and soybeans.
Looking ahead, the potential rally in commodity prices is fueled by expectations of possible U.S. easing and rising geopolitical risks. With the U.S. economy slowing down and a potential interest rate cut by the Federal Reserve on the horizon, commodity prices are anticipated to surge further in the second half of the year. Additionally, global geopolitical uncertainties, including concerns surrounding the U.S. presidential election, could heighten risks and contribute to the upward momentum.
Investors interested in benefiting from the commodity market’s performance can explore opportunities through the VanEck CM Commodity Index Fund and the VanEck CMCI Commodity Strategy ETF, both of which seek to track the CMCITR index. However, it is important to note that investing in commodities carries inherent risks and may not be suitable for all investors.
