Seasonal Patterns In Commodities

1. Index weightings: Commodity indexes often differ quite significantly from each other in terms of index components. Crude oil (WTI and Brent) e.g. has a weighting of around 40% in the S&P GSCI Index. By contrast, in other indexes such as the Bloomberg Commodity Index or the Refinitiv / CRB / Thomson Reuters Core Commodity Index, the weighting of crude oil is markedly lower. Choose the index instrument (ETC, commodity ETN, commodity certificate, etc.) for your seasonal commodity allocation that comes closest to what you envisage with respect to index components.

2. Index types: If you decide to invest in a product emulating a commodity index (ETC, commodity ETN, commodity certificates, etc.), you should use either this product for the seasonal analysis or the index that comes closest to it (usually called "ER" or "TR", but not "spot"). This is because investable products in consumable commodities ultimately track futures prices rather than spot prices (background: in contrast to financial assets such as stocks, the futures prices of consumable commodities can deviate to a much greater extent from spot prices).

3. Rollover rules: individual commodities offer more investment opportunities than commodity indexes. In the case of consumable commodities such as copper, crude oil, or soybeans, investments are usually made through futures contracts or products that track futures prices (via the associated ETCs, commodity ETNs, commodity certificates, etc.). However, since futures have finite terms to maturity, invested funds have to be moved into the next front month future at the end of the term ("rollover"; for products that track futures prices such as ETCs, commodity ETNs, or commodity certificates, the issuer is taking care of this). Depending on the rollover rule, different patterns result. Therefore, the seasonal patterns of identical commodities may actually look different. However, as a Seasonax user, you do not have to concern yourself with the details of rollover rules: the search function of Seasonax automatically suggests the first instrument with a rollover rule that emulates a real investment.

View single page >> |

With the help of a bullish underlying trend, particularly large profits could actually become possible with seasonal investment strategies in commodities in the coming months and years. Therefore, ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.