Behind the Move: ETFs with Gold and Commodities are Booming!

Well, USG just has participated in this terrific gold rally that uh we had we've had a, you know, good uh upswing in gold in 2024 and especially an acceleration in 2025.

I'm Thalia Hayden with ETF Guide.

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Despite record volatility in financial markets and widespread fear, commodities have been standout performers and are getting some welldeserved attention.

How can investors and financial adviserss strengthen their portfolios with ETFs linked to commodities?

Here to discuss that and more is John Love, CEO at USCF Investments.

Hi John, welcome to the show.

Great to see you again.

Hi Dalia, thanks for having me back.

Great to see you.

The USCF Summerhaven Dynamic Commodity Strategy NOK K1 Fund ticker SDCI has delivered impressive outperformance as compared to stocks, bonds, and cryptocurrencies in the face of fear and volatility.

Why are investors turning to commodities ETFs right now?

Would you say it's inflation, geopolitical risk or something else?

Yeah, I would say it is uh both those things uh inflation and geopolitics uh as well as diversification.

If you look at uh SDCI versus uh the S&P uh SDCI is up about 7% this year uh as of April 22nd last night and the S&P is down about 10%.

So you've got a 17% uh spread uh where commodities uh at least in our our product SDCI are doing better year to date.

So I think people are looking for uh that diversification for one thing.

Uh we saw the same thing in 2022.

So people have a little bit more experience with this uh in this decade versus the last one where commodities underperformed.

Commodities are really providing um you know some of that that balance you want in a portfolio.

The other thing though as you mentioned um I mean there's some significant concerns about inflation.

It had been going down.

It is down, but with tariffs, trade wars, uh depending on how this plays out, uh inflation could be looking at uh some substantial increases uh especially if uh Fed independence is uh captured by the uh the administration and we lower interest rates.

So there's not even something to uh to fight inflation.

Commodities historically have uh provided a good hedge against inflation, broad commodities.

So, uh I think that's playing into it.

And then of course the geopolitics of it.

Uh you have a huge shakeup in uh global trade right now uh based on uh you know what what the US administration is doing the retalatory tariffs that are occurring and we just have to see how that all plays out.

But uh I think that's one reason or several reasons people are looking at uh commodities in in 2025 and and looking forward.

Gold is trading near all-time highs, and that's been good news for the USCF Gold Strategy Plus Income Fund, ticker USG.

How has USG benefited from the upswing in gold prices?

And can you discuss USG's unique income strategy as well?

Sure.

Well, USG just has participated in this terrific gold rally that uh we had we've had a you know good uh upswing in gold in 2024 and especially an acceleration in 2025 as people have uh become risk off and turn to uh assets that uh typically uh they see as protecting a portfolio.

Uh bonds actually people are uh shying away from a bit more especially uh US bonds this year.

So gold I think has benefited even a little more uh from that.

So USG tracks the price of gold uh by holding futures contracts.

Uh its income strategy is it sells covered calls on those futures.

So it basically earns uh some income on top of the gold positions.

Now when uh gold is rising um you know a gold only strategy may outperform.

What's interesting is if you look over the last year again looking uh today's uh the April 23rd uh looking back uh over the last year you can see that uh USG has actually kept pace with something like GLD or some of the the bigger gold funds. uh which is interesting because despite this good runup um you know you would expect that the covered call strategy while providing income it might underperform a little bit but it's kept pace uh albeit we've return some of that in the form of of uh of income.

So USG is really a strategy that's designed to uh let you participate in gold uh and hold gold long term but actually get something that gold in usually doesn't provide which is income.

And uh although it's done well over the last year looking back uh it it actually you know in flat markets if gold gets toppy and goes down a little bit those covered calls are going to offset that.

And if co gold is flat, those covered calls are going to earn income even though the gold price isn't isn't doing well.

So, uh we think it's a product that uh you know gives you that gold exposure but uh gives you a little bit something extra.

Makes sense.

Copper is becoming an increasingly important critical global material.

And it's interesting to see this year's divergence in the performance of copper equities versus physical copper.

The United States Copper Index Fund, ticker CPER, is one strategy for getting copper exposure.

What's going on right now in the copper market?

So, copper is uh historically, I think, as people know, it's kind of the canary in the coal mine in terms of predicting recessions, um the economic cycle.

Um and this year it's up over 20%.

Um so, it's interesting because we have a lot of uh turmoil going on right now. we've got uh some concerns about recession, inflation, and all of these things.

And yet, copper's up.

So, it's either telling us that there isn't going to be a a big downturn/recession, or uh it's it's this new story is so powerful that even in the wake of all this economic uh potential weakness, copper is is still uh doing well.

And there's two reasons for that.

One, just looking at the supply and the demand side.

On the supply side, we are not producing enough copper relative to demand and it is very difficult to open new copper mines and bring new production online.

Sometimes it takes 10 15 years to get a new mine uh up and running and there's all this regulation that uh people have to go through in order to mine copper.

Uh the second thing is copper was already is already critical to uh the global economy but we are seeing a potentially exponential increase in demand for copper as we have uh data center builds buildouts the electrification story AI um and and then just you know world infrastructure that needs uh needs repair growing infrastructure all of that.

So long-term, mid medium-term, we have a real strong need for for copper worldwide and there's not enough of it.

So I think that's a very uh bullish uh story for uh one commodity in particular.

Now in the near term there's question about whether you know if there's a downturn will that have some effect on copper.

So we've kind of got this pushpull going right now.

Um, we saw that copper dropped off uh in the wake of Trump's Liberation Day tariffs uh as concerns about global growth materialized, but it's since recovered somewhat and it it has stayed ahead of uh the broad equity market.

You also mentioned that uh it's done better than copper miners.

Copper miners, I think the reason for that is you're exposed one to just general equity beta and two to idiosyncratic factors with the individual copper miner companies.

So, it's not a pure play on copper.

Sometimes, uh, it may do better.

Sometimes it may uh work as almost a leverage play and other times it won't.

Um, but you're taking on a different exposure when you take on miners versus when you take on something like CPER, which is just a pure play on copper.

Switching gears a little bit, the United States 12month natural gas fund, ticker UNL, and United States natural gas fund, ticker UNNG, have both been lifted by higher natural gas prices, and despite volatility, prices have remained firmly up.

Why is natural gas performing so well compared to other energy commodities?

Uh, well, you know, the most direct reason this year is this is sort of the age-old reason.

Natural gas as priced in the United States or really any foreign market tends to be a more localized commodity.

So what's going on in your home market is driving your natural gas prices more than anything right now.

Now there's a lot of things going on like LG exports we can talk about in a second, but really what's happened this year is we had a cold winter.

We came into the year with uh natural gas inventories in the United States at pretty much their maximum level over the last uh five years at least, probably their all-time high.

We have since dropped down below uh where we were a year ago and below the 5-year average.

So, we have about 20% less natural gas in storage right now than we had one year ago.

So, that's just a a bullish uh factor right there.

On top of that, I think you do have some sentiment with uh, as I mentioned, LNG exports.

Um, you know, they are projected to uh rise.

We're building out more terminals.

There's more capacity there.

The the trade war uh has somewhat uh curtailed uh some of that story or at least uh you know interrupted it a bit because if we've got tariffs everywhere then that's going to impact uh other countries interest in our LNG.

But I think that story will, you know, is a long-term one that will play out.

So, as that comes back into focus, uh we'll probably move away somewhat from this being historically a domestically priced commodity to a more internationally priced commodity.

Uh the other thing is that uh we've moved into this new administration.

There's this new sentiment with natural gas where uh the Biden administration was phasing out fossil fuels, supporting uh clean energy.

The Trump administration has canceled wind farm projects.

Um is kind of got this war on uh on renewables.

Um and that's just naturally going to create uh demand for for natural gas.

Um and it is something that I think in you know the industry and companies look at is while it's not a clean fuel, it is cleaner and we need all the energy we can get.

So it is a a good commodity to switch to for energy certainly better than coal or petroleum as we build out renewables and as we make that energy transition.

So all of those factors I think have have come into play in terms of sentiment but the bottom line is this year so far it's it's simply uh you know supply demand uh the age-old story with commodities and the fact that we are uh we are below where we were last year.

And one last question before you go, John.

Some ETF investors and financial adviserss are probably wishing they would have added commodities to their portfolios.

It's definitely not too late.

So, are commodities ETFs more of a hedge or can they be used as a long-term core allocation?

They can be used as a long-term core allocation.

Absolutely.

Uh it is definitely not too late.

Um while we've had great outperformance uh with uh commodities this year um and even looking over the the last year um and looking again at 2022 after 2022 depending on what you what product you looked at or what index you looked at um commodities held up uh pretty well. uh the Bloomberg commodity index, which is the most widely cited uh commodity index, kind of the S&P 500 of of commodities.

Um you can look at that and kind of see the general level of of a broad swath of commodities.

If you look at our product SDCI, we hold uh we have a very high beta to uh the Bloomberg Commodity Index about 90 uh 90% or higher, which means we track the broad commodity market very well.

But we've had better performance uh relative to the Bloomberg commodity index uh sometimes by a substantial amount and that's the case over the last year year to date and so forth.

And the way the reason for that is uh we hold uh we don't hold all uh commodities at the same time.

We hold every sector.

So we're exposed to basically all these divergent uh commodities but we have a the fund has a history of picking the commodities that uh or might we're more likely to outperform than underperform.

Um and we have an equal waiting strategy.

So we have exposure to things like cocoa that did extremely well over the last uh definitely last year in 2024. um the last couple of years uh it's done well and we can give you exposure to more exposure uh to some of those other commodities wherever the the good stories come from.

So that's a differentiator differentiator in terms of the product.

But back to your general question, um, no, it's definitely not too late.

And, you know, as we see all of these things playing out with the the trade war and all of that, we did see commodities come down uh after the April uh 2nd uh tariff announcement from the US, but uh they've since uh bounced back a bit.

Uh that was basically a uh concern about global growth slowing down. long term if you put tariffs on things you interrupt trading relationships you tend to make uh things more expensive so uh there's that fundamental in place the US by its actions intentionally or not is driving down the dollar most commodities are priced in dollars and so that creates an incentive for people to buy them increases demand so that raises prices as well and then just over the long term that's a really critical thing is if we look back decades upon decades commodities ities have kept pace. broad commodities now uh and we can look at the BCOM uh the Bloomberg commodity index uh alone just to just to establish this have generally kept pace with uh equities uh they have similar risk they have similar performance over the long term there are decades where there's divergences in the 70s commodities vastly outpaced equities uh in the last decade the 2010s uh commodities underperformed and that was kind of an anomaly uh and that divergence is is closing up And we're seeing uh significant uh improvements in commodities in this decade.

And it seems like the environment we're in uh is maybe a little more like the 70s than the 2010s.

We'll see what happens.

But you had really historical outperformance by US equities and historical underperformance in commodities during that time frame.

We think that's probably changing and commodities provide a good balance in your portfolio. uh not going to work every year.

It's not going to work over, you know, every month, but over the long haul, commodities tend to zigg when uh equities zag.

So, it's a a u good core holding in your portfolio over the long term.

John, thank you so much for dropping by and we'll see you next time.

Thanks, DAS.

Uh see you next time.

Thanks for having me again.

Take care.

Well, that does it for today's episode of Spotlight.

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To learn more about the investment strategies and ETFs we discussed on today's program, be sure to visit uscfinvestments.com.

I'm Thalia Hayden with ETF guide.

Thanks for watching and we'll see you next time.