The recent behaviour of the CRB index (and commodity ETFs in general) has been about exciting as watching wet paint dry! There has been considerable bullish (and bearish) talk on commodities yet as a “group” they have not moved since June last year! Certainly the behaviour of the CRB suggests that commodities have gone nowhere.
But wait, in the “real world” the picture is very different. Take a look at the spot commodity market. The CRB Spot index has almost reclaimed all its 2008 losses.
We place more importance on the behaviour of the CRB Spot index rather than the CRB Futures index because the spot index is free from the effects of differences such as backwardation and contango and thereby reflects the real world price behaviour of commodities. And what is in the CRB Spot All Commodities index? Here is a basic listing:
We think that it is only a matter of time before commodity futures break to the upside and with that so too will the big commodity ETFs (DBC, RJI, GSG, DJP)
