Futu Research | ETF Investment Research

Views 45272024.05.23

Energy, Silver, Crude Oil ETF Analysis | Mining Commodities ETF's Path to Fortune

Cattlemen who are interested in financial hot spots may have noticed that the recent momentum in precious metals and commodities has been quite strong. In contrast, the ETF in question is also bullish.
Gold and Precious Metal Blocks
Gold and Precious Metal Blocks

Why are bulk commodities worth paying attention to?

AS AN ALTERNATIVE INVESTMENT, COMMODITIES CAN PLAY THEIR UNIQUE ROLE IN DIVERSIFIED INVESTMENT.

First, commodity price volatility is usually unrelated to traditional asset classes, such as stocks and bonds, which can reduce the overall risk of a portfolio. Second, higher commodity prices help hedge the risks of inflation and protect the real value of the portfolio. In addition, supply relationships have a greater impact on commodity prices, and investors can gain investment opportunities by keeping an eye on the supply situation.

So, why choose ETFs to invest in commodities?

Investing in commodity ETFs is favored by many investors because:

  1. It achieves the purpose of risk diversification by combining multiple commodity assets and maintaining high liquidity and low thresholds in exchange-traded transactions;

  2. Compared to investing directly in futures or derivatives, ETFs require lower management costs and transaction fees and are managed by a professional team, saving investors from dealing with complex issues such as contract showtimes and warehouse logistics;

  3. In addition, ETF position information is made transparent on a daily basis to help investors understand and make informed decisions, while many commodity ETFs closely track commodity indices, enabling investors to fully participate in the performance of the entire commodity market, without being limited to single commodity price movements.

In short, ETFs themselves have diversified characteristics that reduce the risk of investing in commodity futures, options, or stocks. With its many advantages, such as convenience, transparency, liquidity, and relatively low cost, ETFs have become an attractive investment tool for entering the commodities market.

The specifics of commodity ETFs

To understand the specifics of a commodity ETF, let's first clarify what categories it actually includes here —

According to the US stock market, according to Futubull's ETF classification, major commodities include crude oil, energy and precious metals.

(Hint: Go to the Futubull App homepage, click on the top right corner number to enter the ETF page directly to explore different products~)

Among them, especially in precious metals and energy, the recent performance has been particularly outstanding:

Below we focus on a strong ETF under commodities as a whole:

1. Energy ETF

Energy ETFs are ETFs targeting energy-related companies that invest in energy commodities such as oil, gas, coal, nuclear, and other energy.

With the development of the global economy and changes in energy markets, the market size of energy ETFs is constantly expanding. Currently, energy ETFs mainly cover the fields of oil and gas, renewable energy, nuclear, etc. At the same time, the types of ETFs are also becoming more diverse, including leveraged ETFs, reverse ETFs, etc. We will introduce you to some of the best traded energy ETFs:

(1)$First Trust Exch Traded Fund 2 Energy Alphadex Fd Usd(FXN.US)$: First Trust Energy ETF, it is an ETF that tracks U.S. energy companies, designed to provide investments in the U.S. energy industry. The ETF's portfolio includes oil and gas mining, energy services, renewable energy and other energy-related companies. FXN's portfolio covers different areas of the U.S. energy industry, helping investors understand and cover the entire U.S. energy market. Its advantages include a wide portfolio, risk diversification, low cost rates, etc. However, FXN also has industry and market risks in the US energy market.

First Trust Energy AlphaDex Fund (FXN.US)

(2)$United States Natural Gas(UNG.US)$It is known as the United States Natural Gas Fund, LP. A tradable fund, the ETF's investment strategy is to make a tracking investment in gas prices by investing in gas futures contracts. Natural gas prices may rise in the event of increased seasonal demand such as winter, resulting in investment opportunities. However, due to the large volatility of natural gas prices, UNG's investment risk is more suitable for risk-tolerant investors.

U.S. Natural Gas ETF (UNG.US)

(3)$iShares Global Clean Energy ETF(ICLN.US)$: Fully known as iShares Global Clean Energy ETF. The ETF's investment strategy is to invest in assets in global renewable energy companies, including solar, wind, hydropower, and more. It is a better option for investing in the renewable energy industry. THE PORTFOLIO IS MORE DIVERSIFIED, COVERING RENEWABLE ENERGY COMPANIES FROM DIFFERENT REGIONS OF THE WORLD. THE INVESTMENT RISKS ARE LOWER AND THE INVESTMENT STRATEGY IS ENVIRONMENTALLY FRIENDLY AND SUSTAINABLE, RESPECTED FOR SOCIETY AND THE MARKET.

Global Clean Energy ETF-iShares (ICLN.US)

Second, Precious Metals ETF

WHERE GOLD ETFS CAN BE REFERENCED IN THIS ARTICLE:GOLD ETF INVESTMENT FULL ANALYSIS

In this article, we will introduce you to the following three highest traded silver ETFs:

(1)$iShares Silver Trust(SLV.US)$: Fully known as iShares Silver Trust, it is a silver-based ETF. Its goal is to earn a return on investment by investing in silver. The ETF invests in silver futures contracts and tracks the movement of silver on the London silver market. SLV is a highly liquid ETF that can be traded easily. However, SLV has a relatively high management fee of 0.50%.

(2)$Sprott Physical Silver Trust(PSLV.US)$: Fully known as Sprott Physical Silver Trust, it is a silver-based ETF, but unlike SLV, PSLV holds physical silver bars rather than silver futures contracts. Investors buying PSLV shares are equivalent to gaining ownership of tangible silver bars. PSLV's portfolio is made up of tangible silver bars, which allows investors to participate directly in physical transactions of silver. However, due to the need for storage and preservation of physical silver bars, PSLV costs more, with a management fee rate of 0.45%.

Sprott Physical Silver Trust (PSLV.US)

(3)$Abrdn Silver ETF Trust(SIVR.US)$: Fully known as Aberdeen Standard Physical Silver Shares ETF, it is also a silver-based ETF that holds physical silver bars. SIVR's portfolio consists of physical silver bars, which gives investors direct ownership of physical silver. SIVR has a relatively low management fee of 0.30%. However, because holding physical silver bars requires storage and preservation, operating costs for SIVR may be higher.

Abrdn Silver ETF Trust (SIVR.US)

In summary, SLV, PSLV, and SIVR are all silver-based ETFs, but their investment strategies and portfolios vary widely. SLV invests in silver futures contracts, while PSLV and SIVR hold physical silver bars. Investors can choose the right ETF based on their investment preferences and risk tolerance.

3. Crude oil ETF

Accordingly, we will select the three most traded crude oil ETFs to introduce you to:

(1)$United States Oil Fund LP(USO.US)$: Known as the United States Oil Fund, it is an ETF that tracks the price of WTI crude oil. The ETF tracks the price movements of WTI crude oil by investing in crude oil futures contracts. The advantage of the USO is that it allows investors to participate in the oil market at a relatively low cost without the need to buy crude oil directly. In addition, USO is an ETF with good liquidity and easy to trade. However, the USO has its drawbacks due to rolling costs, higher market risks, and more due to changes in futures contracts.

U.S. Crude Oil Fund ETF (USO.US)
U.S. Crude Oil Fund ETF (USO.US)

(2)$ProShares UltraShort Bloomberg Crude Oil ETF(SCO.US)$: Fully known as ProShares UltraShort Bloomberg Crude Oil, it is a bearish crude ETF designed to provide a reverse investment in the price of WTI crude oil. The ETF achieves its goals by investing in oil price futures and other derivatives. SCO has the advantage of providing protection against falling oil prices, which makes it an investment tool in oil market downturns. However, SCO also has high risks associated with short-term trading and speculation.

Proshares Double-Done Bloomberg Crude ETF (SCO.US)
Proshares Double-Done Bloomberg Crude ETF (SCO.US)

(3)$SPDR S&P Oil & Gas Exploration & Production ETF(XOP.US)$: The SPDR S&P Oil & Gas Exploration & Production ETF is an ETF that tracks companies in the U.S. oil and gas industry. The ETF's portfolio includes companies such as oil and gas exploration, exploration and production. The advantage of XOP is that it can cover the entire U.S. oil and gas industry, including production, extraction, exploration, and other processes, thus dispersing industry risks. In addition, XOP charges are relatively low. However, XOP also has industry and market risks in which the oil and gas markets compete.

S&P Oil & Gas Mining Index ETF-SPDR (XOP.US)
S&P Oil & Gas Mining Index ETF-SPDR (XOP.US)

Apart from this, there are ETF-related ingredients in the Dai Dai products, due to the size of the size, so you can see for yourself on the Futubull Feeds page.

However, while ETFs are good, there is a point to remind everyone:

For ETFs with futures contracts as underlying assets, performance may differ slightly from actual asset prices — futures contracts include costs such as storage fees, so futures contracts themselves may be higher than spot prices. Its value is not only influenced by the price of the asset itself, but also by additional factors such as the time value of futures contracts, futures exhibition costs.

If the futures contract price already includes the expected spot price increase, then even if the spot price actually goes up, ETF holders may not be able to profit from the price increase.

A commodity ETF with spot underlying assets would do better. Therefore, if you do not want to take risks from other factors, invest in a spot ETF or a more stable and value-for-money ratio.



How to trade with Futu?

Before investing (buying and selling) stocks, you first need to open a securities (stocks) account. Just like depositing money in a bank, you need to open a bank account first.

Securities (Stock) Account Opening Process

Step 1: Head over to the Futubull network and sign up for a new account.(Register now)

Step 2: Open a securities account on the basis of the Futu account.(Open account now)

Step 3: Fill in your personal and financial details (includingBank Code and Account Number), and then deposit funds via EdDA Quick Deposit, Fast Transfer (FPS), Bank Transfer.(Invest immediately)

Step 4: Download the Futubull Customer Portal and log in.(Download now)
>> Futu Securities offers 5x24 hours trading of individual US shares and free LV2 emotions, open your wallet now and enjoy new rewards

Frequency Asked Questions
What are Energy ETFs
• First Trust Energy AlphaDex Fund (FXN.US)
• U.S. Natural Gas ETF (UNG.US)
• Global Clean Energy ETF-iShares (ICLN.US)
What are the Silver ETFs
• Silver ETF-iShares (SLV.US)
• Sprott Physical Silver Trust (PSLV.US)
• Abrdn Silver ETF Trust (SIVR.US)
What are the Crude Oil ETFs
• U.S. Crude Oil Fund ETF (USO.US)
• Proshares Double-Done Bloomberg Crude ETF (SCO.US)
• S&P Oil & Gas Mining Index ETF-SPDR (XOP.US)

One-stop trading with Futubull

Enjoy welcome rewards and lifetime 0 commission on HK stocks

Terms and conditions apply right-arrow

| GENERAL DISCLAIMER |

This report (the “Report”) is prepared by Futu Securities International (Hong Kong) Limited (“Futu Securities”). The person who retained this Report either via receiving and/or reading  (including any relevant attachment), shall agree to be bound by the terms and limitations set out below as has the right to retained this Report. Any failure to comply with these limitations may constitute a violation of the law.

This Report shall not be reproduced in whole or in part, distributed or published by you for any purpose. Futu Securities shall not be liable for any direct or consequential loss arising from any use of material contained in this Report.

The information contained in this Report has been obtained from public sources which Futu Securities has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this Report are based on such information and are expressions of belief only.

Futu Securities has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in this Report is subject to change, and Futu Securities and/or its affiliated companies (collectively the “Futu Group”) shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will Futu Securities be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages.

Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this Report are as of the date indicated and are subject to change at any time without prior notice.

This Report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. This Report should not and does not constitute an offer, solicitation, invitation, recommendation for buying or selling of investment products or as basis on making any investment decision, or constitute as professional advice from any member of Futu Group. The products mentioned in this Report may not be suitable for all investors and a person receiving or reading this Report should seek advice from a financial adviser regarding the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.

This Report should not be relied upon as authoritative without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this Report has been made available constitutes neither a recommendation to enter into a particular transaction nor a representation that any product described in this Report is suitable or appropriate for the recipient. Recipients should be aware that many of the products which may be described in this Report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.

This report is provided by Futu Securities, which is regulated by the Securities and Futures Commission of Hong Kong (SFC) in Hong Kong. If you have any questions about the Futu Securities Research Report, please contact Futu Securities. The CE number of SFC held by the author has been disclosed next to the author's name on the front page of the Report.

Nothing in this Report shall be construed to be an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in this research should take into account existing public information, including any registered prospectus in respect of such security.

| Certification |

Analyst(s) certified that (i) the views expressed in this Report accurately reflect his/her personal views on the listed corporation in this Report; and (ii) no part of his/her compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this Report.

Analyst(s) certified that he/she and/or his/her associate did not deal in or trade the listed corporation or its relevant securities within the 30 days prior to and 3 business days after the issue of this Report.

| Disclosure of Interest |

Analyst Disclosure: Neither the analyst(s) preparing this Report nor his/her associate has any financial interest in or serves as an officer of the listed corporation covered in this Report.

Firm’s Disclosure: Futu Securities does not have any investment banking relationship with the listed corporation covered in this Report in the past 12 months nor any financial interest of 1% or more of the market capitalization in the listed corporation. In addition, no executive staff of Futu Securities serves as an officer of the listed corporation.

| Availability |

The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Futu Securities to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.

Information contained herein is based on sources that Futu Securities believed to be accurate. Futu Group and/or relevant personnel (i.e., employees of Futu Group) may have positions and transactions in relevant investment products. Futu Group and/or relevant personnel does not bear responsibility for any loss suffered by the investor from the use of or reliance on the information set out in this report.

For details of different product's risks, please visit the Risk Disclosures Statement on http://www.futuhk.com.

This Report is written in Chinese and English, and the two versions are equally valid. If there is any contradiction between the two versions, the English version shall prevail.

Recommended