The commodities space has seen explosive upside so far in 2024. Year-to-date, crude oil futures are up 12%, copper has risen 26%, silver has climbed 25%, and gold is up 15%.
According to Ben McMillan, the CIO of IDX Advisers, the party is just getting started.
McMillan manages the IDX Commodity Opportunities Fund (COIDX), which is up 6.5% in 2024 and 2.6% since its inception on November 4, 2022. While that seems meager, major indexes like the Bloomberg Commodities Index and the S&P GSCI have delivered -8% and -11% returns, respectively, over that time. The fund invests in various commodities ETFs via an actively managed strategy, allowing investors to gain diversified exposure while hedging downside risks and leaning into areas of the market McMillan and his team believe will outperform.
In an interview with Business Insider on Thursday, he said he thinks the commodities space is at the beginning of an extended bull market that will last several years.
This is for a few reasons. One is because growing government budget deficit spending will lead to a weaker US dollar, he said, which will boost commodity prices because they’re denominated in US dollars. Another is that geopolitical conflicts will continue, and they have already caused the prices of commodities like oil and grain to soar. Third, he said that global central banks are buying elevated amounts of gold and will continue to do so, which will draw retail traders to do the same.
“We are in the mind that we are in the very early innings of a commodities bull run,” McMillan said. “These are things that aren’t going to turn around anytime soon. These are big, secular, generational changes that are going to reset the price of these commodities higher forever.”
To take advantage of the upside, McMillan shared three ways investors can gain exposure to the space.
3 commodities investments to watch
First, McMillan said he likes investing in both gold and copper, which he believes could trade at levels 20% higher than today a year from now and double in price over the next decade.
For copper, McMillan said bullish trends include a supply shortage due to certain mines temporarily shutting down and the ongoing global move toward digitization and electrification.
“Depending on the analyst that you listen to, copper consumption in the next 10-50 years is going to exceed what it has been in the last 500,” he said.
For gold, as mentioned above, central banks continue to snatch up the precious metals, and McMillan thinks further demand will come from US retail investors.
“Countries are aggressively starting to sell Treasurys to buy gold. “I don’t see that reversing anytime soon,” he said. “We expect gold to continue setting all-time highs this year, next year.”
He recommended gaining exposure to the metals through ETFs, given that various products offer tailored exposure to what investors might be looking for. ETFs also allow investors to capture upside price action on the assets without having to physically hold and store them, and offer higher liquidity levels.
The iShares Gold Trust (IAU), SPDR Gold Shares (GLD), and the GraniteShares Gold Trust (BAR) are common funds investors use to gain exposure to the price of gold. For copper, the United States Copper Index Fund (CPER) offers exposure to the metal’s spot price.
Given his bullish views on the commodities space as a whole going forward, McMillan said he also likes mining companies, particularly those that mine precious or industrial metals.
“There’s a lot of value that has yet to be unlocked, we think, in the miner landscape” McMillan said.
Funds like the Global X Silver Miners ETF (SIL), the US Global GO GOLD and Precious Metal Miners ETF (GOAU), and the iShares MSCI Global Metals & Mining Producers ETF (PICK) offer diversified exposure to the above themes.