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.