Going Beyond Gold: Capturing the Broader Commodity Complex
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Gold has undeniably been the standout asset class of the year, stealing the spotlight after a string of record highs. Bullion prices have surged 30% YTD to outpace equities and bonds amid a combination of central bank hoarding and a general flight to safety. Despite the precious metal’s glimmering outperformance, investors may be overlooking opportunities among the broader commodities complex.
The Bloomberg Commodities Index (BCOM) is the most widely cited benchmark for commodities in a multi-asset portfolio. Precious metals comprise 20% of the index, industrial metals account for 16%. Energy makes up nearly a third, and agriculture composes the rest. From industrial metals and energy to agriculture and livestock, a diverse range of sectors is poised to benefit from shifting macro trends, supply constraints, and renewed demand.
At last week’s VettaFi Alternatives Symposium, we polled our live advisor audience about their changing attitudes toward investing in gold over the next six months. More than 60% said they planned to keep current exposure unchanged. More than a fifth said they planned to add to their gold exposure. Gold’s rally is prompting a reassessment of inflation hedges and portfolio diversification. So now may be the time to explore the untapped potential of the wider commodities universe.
Commodities overall haven’t gotten much screen time this year. But plenty of crosscurrents beneath the surface could shift investor confidence in their favor. Silver, copper, and even lean hogs prices have rallied double digits on resurgent industrial demand and tightening supply. Meanwhile, agricultural commodities, like soybeans and wheat, are up on disruptive weather patterns. With inflation holding fast above 4% and the Federal Reserve signaling a slower path to easing, diversification into nongold commodities may offer untapped upside — not to mention, critical hedging benefits — for portfolios.
Commodity ETFs: A Broader Scope
Invesco boasts the world’s oldest, largest, and most liquid broad-based commodity ETF, the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC). It’s accrued more than $400 million in net inflows this year. That makes it the most popular broad-based and active commodity product on the market. The nearly $5 billion fund just clinched etf.com’s Commodity of the Year award for “outstanding performance and success through excellent levels of liquidity and commodity tracking in 2024,” while remaining cost competitive.
PDBC is an actively managed commodity-linked futures fund heavily weighted in energy. But it also offeris exposure to gold and a broad basket of soft commodities. The fund employs an optimum yield strategy, not unlike smart beta, and does so without issuing K-1 tax forms. That makes it a tax-efficient choice for investors seeking diversification in the commodity sector.
Kathy Kriskey, head of alternatives product strategy at Invesco, told me much of gold’s glorious run has largely been the result of central bank binge buying. She says it’s time to sift through the noise and stick with broader commodities, even when they’re not making waves.
“It’s not the ETF purchasers that are pushing this [gold]market higher. It’s truly the central banks,” she said. “I think the biggest mistake investors make is chasing a commodity market. They deserve an allocation into an alts bucket. But it’s better when they buy them when they’re not in the news and that they hold them to hedge inflation or uncertainty or provide diversification.”
Right now, the fund has more than half of its holdings in energy. But it is set to pare exposure closer to 40%. Slowing global growth, trade uncertainty, and oversupply concerns from non-OPEC countries have weighed on crude prices, which are down for the year.
Silver & Soft Commodities in the Spotlight
Elsewhere, coffee and cocoa prices are coming off record highs. Silver prices shot up to 14-year highs in the second quarter and have risen 18% for the year. Silver’s strength has stemmed from the explosive growth of the AI and electric vehicle industries. Both require significant electrical conductivity. Among the most popular products is the abrdn Physical Silver Shares ETF (SIVR). It has netted more than $300 million in inflows so far.
Bob Minter, director of investment strategy at Aberdeen Investments — a leader in the commodity space — noted the gold/silver ratio is hovering around its recent highs. That’s a markedly bullish sign for silver. “We love talking about the gold/silver ratio, the ratio between the prices,” he said. “And they’re not substitutes. Silver is mostly an industrial metal and gold is not. So, when we hit a peak in that ratio, it marks maximum economic pessimism. And it’s a really good forward-return environment for silver and industrial metals.”
Apart from SIVR, Minter runs several broad-based commodity futures funds, including the abrdn Bloomberg All Commodity Strategy K-1 Free ETF (BCI). More than a third of the fund is held in precious metals, more than a quarter is in energy, and nearly a third is in agricultural goods. The abrdn Physical Precious Metals Basket Shares ETF (GLTR), which is roughly two-thirds gold, has also seen positive inflows this year, as has the abrdn Physical Palladium Shares ETF (PALL). All three are among the top 20 most popular commodity ETFs in 2025.
As central bank hoarding fuels gold’s rise, experts suggest looking beyond the hype. Strategic allocations to a diversified commodity basket are especially appealing due to their low correlation to the broader markets, inflation-hedging efficiency, and tendency to shine in a late-stage economic cycle. ETFs like PDBC and SIVR provide efficient, tax-friendly exposure to undervalued segments of the market.