Cautious Optimism for Commodities in 2025
January 17, 2025
Read Time 3 MIN
Navigating Headwinds and Outperformance
Commodity index returns remained relatively flat during the fourth quarter, as a stronger U.S. dollar and rising interest rates provided support, despite subdued demand for gold toward the quarter's end and heightened volatility in oil markets. The Federal Reserve's 25 basis point rate cut in December 2024 added complexity to the landscape, offering limited relief to commodities. Markets also reacted to the geopolitical and economic implications of Donald Trump’s election victory in early November. Meanwhile, China's slowing economy and underwhelming monetary and fiscal policy responses further weighed on global commodity demand, presenting a significant headwind for the sector.
The UBS Constant Maturity Commodity Index (CMCITR) returned -0.29% for the fourth quarter and +5.93% for the year, outperforming the Bloomberg Commodity Index (BCOM), which posted returns of -0.45% for the fourth quarter and +5.38% for the year. The CMCITR’s relative outperformance can be attributed to its lower exposure to the precious metals sector which faced headwinds during the quarter.
Sector Review: Energy Gains, Resilient Livestock, and Opportunities Amid Challenges
The energy sector rose approximately 5% in Q4, driven by a similar increase of around 5% in crude oil and crude product prices. Natural gas, however, remained relatively flat for the quarter. The long-term outlook for U.S. natural gas has improved following Trump’s election victory as anticipated deregulation and expanded U.S. LNG (liquid natural gas) export capacity are expected to bolster growth prospects for the domestic natural gas industry.
The livestock sector also rallied in the fourth quarter as both hog and cattle prices rose. However, in December, the outbreak of avian flu began to impact livestock, particularly cattle, adding to market volatility. The virus' spread fueled concerns about supply shortages and potential culling, driving up cattle prices. Stricter biosecurity measures and higher operational costs further strained livestock producers, impacting market dynamics.
The agriculture sector was unchanged in the quarter. Cocoa, a key component of the CMCITR, delivered exceptional returns, with London Cocoa surging approximately +88% and regular cocoa up around +77%. Coffee also posted strong gains, with returns of around +20%. However, these impressive performances were offset by losses in grains and sugar, which diminished the overall gains in the sector.
Precious metals declined during the quarter, driven primarily by losses in silver. Gold prices experienced a modest decline of about 1% toward the end of the quarter, driven by a stronger U.S. dollar and investors cashing out gains. The impact of gold on the CMCITR was minimal, given its modest allocation of approximately 5%, compared to BCOMTR’s higher allocation of around 17%. Silver posted a return of about -7%, but its 1% weighting in the CMCITR had a negligible effect on the index's overall performance.
Industrial metals weakened during Q4, with copper prices dropping approximately 10% and nickel prices falling 12%. Persistent concerns over China’s sluggish economic growth and the absence of robust policy measures prompted investors to reduce their exposure to the sector.
The charts below highlight the impact of sector weights on performance.
CMCITR’s lighter allocation in precious metals mitigated potential performance challenges.
Comparative Index Sector Weights
Source: VanEck, Bloomberg. Data as of December 2024.
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CMCITR’s strategic focus, with a lighter allocation in precious metals and stronger emphasis in agriculture, when compared to BCOM, played a key role in mitigating potential performance challenges.
CMCITR outperforms BCOM in livestock and industrial metals, highlighting its strength in sector allocations.
Estimated Q4 2024 Total Return by Sector
Source: VanEck, Bloomberg. Data as of December 2024.
Optimistic Outlook for 2025
The outlook for commodities in 2025 remains cautiously optimistic, with potential support from easing monetary policies, continued demand for energy and industrial metals, and opportunities in agriculture, though risks from geopolitical uncertainties and global economic slowdown persist.
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Disclosures
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third-party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made. Past performance is no guarantee of future results.
The UBS Bloomberg Constant Maturity Commodity Index (CMCITR) is a total return rules-based composite benchmark index diversified across 29 commodity components from within five sectors, specifically energy, precious metals, industrial metals, agricultural and livestock.
Bloomberg Commodity Index (BCOM) provides broad-based exposure to commodities, and no single commodity or commodity sector dominates the index. Rather than being driven by micro-economic events affecting one commodity market or sector, the diversified commodity exposure of BCOM potentially reduces volatility in comparison with non-diversified commodity investments.
UBS AG AND ITS AFFILIATES (“UBS”) DO NOT SPONSOR, ENDORSE, SELL, OR PROMOTE CM COMMODITY INDEX FUND (THE “PRODUCT”). A DECISION TO INVEST IN THE PRODUCT SHOULD NOT BE MADE IN RELIANCE ON ANY OF THE STATEMENTS SET FORTH IN THIS WEBSITE. PROSPECTIVE INVESTORS ARE ADVISED TO MAKE AN INVESTMENT IN THE PRODUCT ONLY AFTER CAREFULLY CONSIDERING THE RISKS ASSOCIATED WITH INVESTING IN THE PRODUCT, AS DETAILED IN THE PROSPECTUS THAT IS PREPARED BY OR ON BEHALF OF VANECK (“LICENSEE”), THE ISSUER OF THE PRODUCT. UBS HAS LICENSED CERTAIN UBS MARKS AND OTHER DATA TO LICENSEE FOR USE IN CONNECTION WITH THE PRODUCT AND THE BRANDING OF THE PRODUCT, BUT UBS IS NOT INVOLVED IN THE CALCULATION OF THE PRODUCT, THE CONSTRUCTION OF THE PRODUCT’S METHODOLOGY OR THE CREATION OF THE PRODUCT, NOR IS UBS INVOLVED IN THE SALE OR OFFERING OF THE PRODUCT, AND UBS DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE PRODUCT AND DISCLAIMS ANY LIABILITY FOR ANY INACCURACY, ERROR OR DELAY IN, OR OMISSION OF THE DATA.
Investments in commodities can be very volatile and direct investment in these markets can be very risky, especially for inexperienced investors.
VanEck CM Commodity Index Fund: You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. Commodities and commodity-linked derivatives may be affected by overall market movements and other factors that affect the value of a particular industry or commodity, such as weather, disease, embargoes or political or regulatory developments. Derivatives use leverage, which may exaggerate a loss. An investment in the Fund may be subject to risks which include, but are not limited to, risks related to agricultural commodity sector, commodities and commodity-linked instruments, commodities and commodity-linked instruments tax, commodity index-related concentration, commodity index tracking, credit, debt securities, derivatives counterparty, derivatives, energy commodity sector, gap, interest rate, market, metals commodity sector, investments in money market funds, operational, passive management, regulatory, repurchase agreements, subsidiary investment, tax (with respect to investments in the Subsidiary), and U.S. Treasury securities risks, all of which may adversely affect the Fund. The use of commodity-linked derivatives such as swaps, commodity-linked structured notes and futures entails substantial risks, including risk of loss of a significant portion of their principal value, lack of a secondary market, increased volatility, correlation, liquidity, interest-rate, valuation and tax risks. Gains and losses from speculative positions in derivatives may be much greater than the derivative’s cost. Investment in commodity markets may not be suitable for all investors. The Fund’s investment in commodity-linked derivative instruments may subject the Fund to greater volatility than investment in traditional securities.
VanEck CMCI Commodity Strategy ETF: An investment in the Fund may be subject to risks which include, among others, risks related to investing in the agricultural commodity sector, commodities and commodity-linked instruments, commodities and commodity-linked instruments tax, derivatives counterparty, energy commodity sector, metals commodity sector, U.S. treasury bills, Subsidiary investment, commodity regulatory and tax risks with respect to investments in the Subsidiary, gap, cash transactions, credit, debt securities, interest rate, derivatives, commodity index tracking, repurchase agreements, regulatory, market, operational, authorized participant concentration, no guarantee of active trading market, trading issues, fund shares trading, premium/discount and liquidity of fund shares, non-diversified, commodity index-related concentration, and passive management risks, all of which may adversely affect the Fund. The use of commodity-linked derivatives such as swaps, commodity-linked structured notes and futures entails substantial risks, including risk of loss of a significant portion of their principal value, lack of a secondary market, increased volatility, correlation, liquidity, interest-rate, valuation and tax risks. Investment in commodity markets may not be suitable for all investors. The Fund’s investment in commodity-linked derivative instruments may subject the Fund to greater volatility than investment in traditional securities. The level of derivatives counterparty risk may be heightened due to the Fund currently only having a single counterparty available with which to enter into swap contracts on the Index.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© 2025 Van Eck Securities Corporation, Distributor, a wholly-owned subsidiary of Van Eck Associates Corporation.
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Disclosures
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third-party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made. Past performance is no guarantee of future results.
The UBS Bloomberg Constant Maturity Commodity Index (CMCITR) is a total return rules-based composite benchmark index diversified across 29 commodity components from within five sectors, specifically energy, precious metals, industrial metals, agricultural and livestock.
Bloomberg Commodity Index (BCOM) provides broad-based exposure to commodities, and no single commodity or commodity sector dominates the index. Rather than being driven by micro-economic events affecting one commodity market or sector, the diversified commodity exposure of BCOM potentially reduces volatility in comparison with non-diversified commodity investments.
UBS AG AND ITS AFFILIATES (“UBS”) DO NOT SPONSOR, ENDORSE, SELL, OR PROMOTE CM COMMODITY INDEX FUND (THE “PRODUCT”). A DECISION TO INVEST IN THE PRODUCT SHOULD NOT BE MADE IN RELIANCE ON ANY OF THE STATEMENTS SET FORTH IN THIS WEBSITE. PROSPECTIVE INVESTORS ARE ADVISED TO MAKE AN INVESTMENT IN THE PRODUCT ONLY AFTER CAREFULLY CONSIDERING THE RISKS ASSOCIATED WITH INVESTING IN THE PRODUCT, AS DETAILED IN THE PROSPECTUS THAT IS PREPARED BY OR ON BEHALF OF VANECK (“LICENSEE”), THE ISSUER OF THE PRODUCT. UBS HAS LICENSED CERTAIN UBS MARKS AND OTHER DATA TO LICENSEE FOR USE IN CONNECTION WITH THE PRODUCT AND THE BRANDING OF THE PRODUCT, BUT UBS IS NOT INVOLVED IN THE CALCULATION OF THE PRODUCT, THE CONSTRUCTION OF THE PRODUCT’S METHODOLOGY OR THE CREATION OF THE PRODUCT, NOR IS UBS INVOLVED IN THE SALE OR OFFERING OF THE PRODUCT, AND UBS DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE PRODUCT AND DISCLAIMS ANY LIABILITY FOR ANY INACCURACY, ERROR OR DELAY IN, OR OMISSION OF THE DATA.
Investments in commodities can be very volatile and direct investment in these markets can be very risky, especially for inexperienced investors.
VanEck CM Commodity Index Fund: You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. Commodities and commodity-linked derivatives may be affected by overall market movements and other factors that affect the value of a particular industry or commodity, such as weather, disease, embargoes or political or regulatory developments. Derivatives use leverage, which may exaggerate a loss. An investment in the Fund may be subject to risks which include, but are not limited to, risks related to agricultural commodity sector, commodities and commodity-linked instruments, commodities and commodity-linked instruments tax, commodity index-related concentration, commodity index tracking, credit, debt securities, derivatives counterparty, derivatives, energy commodity sector, gap, interest rate, market, metals commodity sector, investments in money market funds, operational, passive management, regulatory, repurchase agreements, subsidiary investment, tax (with respect to investments in the Subsidiary), and U.S. Treasury securities risks, all of which may adversely affect the Fund. The use of commodity-linked derivatives such as swaps, commodity-linked structured notes and futures entails substantial risks, including risk of loss of a significant portion of their principal value, lack of a secondary market, increased volatility, correlation, liquidity, interest-rate, valuation and tax risks. Gains and losses from speculative positions in derivatives may be much greater than the derivative’s cost. Investment in commodity markets may not be suitable for all investors. The Fund’s investment in commodity-linked derivative instruments may subject the Fund to greater volatility than investment in traditional securities.
VanEck CMCI Commodity Strategy ETF: An investment in the Fund may be subject to risks which include, among others, risks related to investing in the agricultural commodity sector, commodities and commodity-linked instruments, commodities and commodity-linked instruments tax, derivatives counterparty, energy commodity sector, metals commodity sector, U.S. treasury bills, Subsidiary investment, commodity regulatory and tax risks with respect to investments in the Subsidiary, gap, cash transactions, credit, debt securities, interest rate, derivatives, commodity index tracking, repurchase agreements, regulatory, market, operational, authorized participant concentration, no guarantee of active trading market, trading issues, fund shares trading, premium/discount and liquidity of fund shares, non-diversified, commodity index-related concentration, and passive management risks, all of which may adversely affect the Fund. The use of commodity-linked derivatives such as swaps, commodity-linked structured notes and futures entails substantial risks, including risk of loss of a significant portion of their principal value, lack of a secondary market, increased volatility, correlation, liquidity, interest-rate, valuation and tax risks. Investment in commodity markets may not be suitable for all investors. The Fund’s investment in commodity-linked derivative instruments may subject the Fund to greater volatility than investment in traditional securities. The level of derivatives counterparty risk may be heightened due to the Fund currently only having a single counterparty available with which to enter into swap contracts on the Index.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© 2025 Van Eck Securities Corporation, Distributor, a wholly-owned subsidiary of Van Eck Associates Corporation.