3 Strong Buy ETFs Commodity Investors Should Grab Right Now

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The global commodity markets have been witnessing surging prices for industrial and agricultural commodities. An expected inflationary environment in the United States and the rapid recovery of industrial activities are major drivers of the commodity price increases. With consumer spending on the rise, driven in part by federal pandemic recovery benefits and an improving job market, along with rising capital investments amid the low-interest-rate environment, commodity prices have begun to spike.

The current oil price rally and potential governmental infrastructure spending should leave the commodity markets in contango over the coming months. The Federal Open Market Committee (FOMC) forecasts the United States’ real GDP will rise 6.5% this year, which should drive commodity prices to fresh highs.

While investing directly in commodities could be beneficial against this backdrop, we believe a less-risky way to ride the commodity rally could be investing in commodity ETFs, given their stakes in risk-free U.S. Treasuries.  We think iShares GSCI Commodity Dynamic Roll Strategic ETF (COMT - Get Rating), Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC - Get Rating), and Invesco DB Commodity Index Tracking Fund (DBC - Get Rating) could deliver significant returns in the coming months.

iShares GSCI Commodity Dynamic Roll Strategic ETF (COMT - Get Rating)

COMT invests in a variety of commodities, including energy, metals, and agriculture, and livestock, that are selected from the broader S&P GSCI investable commodity index. The ETF invests in commodity derivatives such as futures, swaps, and options on futures, seeking to profit from spot-price fluctuations. With net assets under management of  $558.29 million, COMT tracks the S&P GSCI Dynamic Roll (USD) Total Return Index.

A unique feature of this ETF is that it doesn’t require K-1 tax reporting because it depends on a wholly-owned Cayman subsidiary to invest in commodity derivatives. Also,  in order to hedge a proportion of its risk, COMT invests in U.S. Treasuries.

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