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Commodity ETF Volume

by: Bespoke Investment Group June 13, 2008 | about stocks: DBA / DBB / DBC / DBO / DBP / GLD / GSG / IAU / OIL / SLV / SPY / UNG / USO    

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As we all know, there has been a boom in commodity ETFs and ETNs over the last few years, and we recently counted 53 that trade on US exchanges.  Investors have increasingly plowed into these securities to trade the run-up in commodity prices as well as easily gain exposure to an asset class that was once difficult to get into.  We gathered the daily volume of these 53 commodity ETFs and ETNs from the start of 2006 and then calculated a 30-day moving average of the total daily volume of all 53 securities.  As shown in the first chart below, volume has soared since the start of 2006.  Given the significant rise in commodity prices, it's not hard to see why volume has surged.

Commodityetfs

Recently, there has been talk that the large number of new commodity ETFs has added to the rise in prices.  While it's hard to quantify the impact that they have had, it's important to note that relatively speaking, the volume is really not that big.  As shown in the chart below, the average daily volume of all commodity ETFs and ETNs is just 1/6th of the average daily volume for the S&P 500 tracking SPY ETF.

Commodityvsspy

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This article has 3 comments:

  •  
    Jun 13 09:29 AM
    When oil breaks to $100 a barrel it is a buy. the best why is the ETF USO. Right now getting into the oil market is stupid. It will chew you up. It reminds me of the Nasdaq in 1998, I will tell you why at @
    theinvestingspeculator...
    Reply
  •  
    Jun 13 10:59 AM
    "As shown in the chart below, the average daily volume of all commodity ETFs and ETNs is just 1/6th of the average daily volume for the S&P 500 tracking SPY ETF."

    But isn't the commodity market, as a whole, much smaller than the stock market, as a whole?

    More interesting perhaps would be to compare the volumes of these commodity ETF's relative to other commodity measures, rather than to stock measures.
    Reply
  •  
    Jun 28 01:04 PM
    Agree with Pangaea - not meaningful to compare commodity ETF volume with SPY volume. Short side of commodity trades made up primarily of commercials using market for hedging purposes. Increase in demand from ETF and commodity index fund activity eats up available short side interest from actual hedging activities.
    Reply
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