Commodity ETFs

Physical metals versus futures-based funds: the structure determines the outcome.

Commodity ETFs come in two very different structures. Physically backed funds (gold, silver, platinum) hold the metal in vaults; their price tracks spot closely, minus fees, and U.S. tax treats them as collectibles. Futures-based funds (oil, natural gas, broad commodities) hold futures contracts they must continually roll forward.

Rolling matters enormously: when longer-dated futures cost more than near ones (contango), each roll sells low and buys high, dragging returns below the spot price's path, sometimes dramatically over years. In backwardation the drag reverses. A futures fund can lose money while the headline commodity price rises.

Check the structure first (physical vs. futures), then the roll methodology, the tax reporting (some issue K-1s), and the fee. The fund name rarely tells the whole story.