When inflation risks resurface, currencies wobble, or equities become crowded, commodities tend to re-enter investor conversations. In recent years, that discussion has increasingly taken place through exchange-traded funds. Commodity ETFs have moved from being tactical hedges to strategic portfolio diversifiers, offering exposure to everything from gold and silver to energy, agriculture, and industrial metals without the logistical challenges of owning physical assets.
Why Commodity ETFs Matter in a Modern Portfolio
Commodities behave differently from stocks and bonds. Their returns are driven by supply constraints, geopolitics, weather patterns, and industrial demand rather than corporate earnings alone. This makes them useful diversifiers, particularly during periods of inflation or macro stress. Historically, commodities have shown low to moderate correlation with equities, helping smooth portfolio volatility over long cycles.
ETFs have made this asset class far more accessible. Instead of dealing with storage, insurance, or futures contracts, investors can gain exposure through listed instruments that trade like stocks, offer daily liquidity, and provide transparent pricing.
The Different Types of Commodity ETFs
Commodity ETFs broadly fall into four categories, each serving a different purpose.
Precious Metals ETFs are the most widely used. Gold ETFs dominate this segment, acting as inflation hedges and safe-haven assets during market stress. Silver ETFs add a cyclical layer, benefiting not only from monetary demand but also from industrial uses such as electronics and renewable energy. In India, gold ETFs backed by physical bullion are well-established, while silver ETFs were introduced more recently and have seen rapid adoption. In the U.S., both gold- and silver-backed ETFs trade with deep liquidity.
Energy ETFs provide exposure to crude oil, natural gas, or energy-producing companies. Some track spot or futures prices of oil, while others focus on integrated energy producers. These ETFs tend to be more volatile, influenced by geopolitics, OPEC policy, and global growth expectations. Indian investors typically access energy exposure through international ETFs, as domestic commodity ETFs remain limited in this segment.
Industrial Metals ETFs track metals such as copper, aluminum, and nickel are materials essential to infrastructure, electric vehicles, and renewable energy systems. These ETFs benefit from global capex cycles and industrial expansion. In the U.S., investors can access both single-metal ETFs and diversified industrial-metals baskets. In India, exposure is mostly indirect via international funds.
Broad-Based Commodity ETFs offer diversified exposure across energy, metals, and agriculture in a single product. These are designed to capture general commodity inflation rather than bet on a single material. U.S. markets have several such ETFs tracking commodity indices, while Indian markets currently offer limited options, making global access important for diversification.
India vs. the U.S.: What’s Available Where
India’s commodity ETF market remains concentrated in precious metals. Gold ETFs are long-established portfolio hedges, while silver ETFs are newer and gaining traction. Other commodities are largely accessed through futures or international funds rather than domestic ETFs.
Commodity ETFs Available in India
| Ticker Symbol | ETF Name | What It Tracks | YTD Performance |
| GOLDBEES | Nippon India Gold ETF | Domestic price of physical gold backed by bullion | 75.68% |
| HDFCGOLD | HDFC Gold ETF | Spot gold prices in India via physical gold holdings | 75.70% |
| SETFGOLD | SBI Gold ETF | Gold as an inflation hedge and store of value | 75.86% |
| GOLDIETF | ICICI Prudential Gold ETF | Physical gold prices linked to global bullion markets | 76.43% |
| SILVERIETF | ICICI Prudential Silver ETF | Domestic silver prices driven by industrial and monetary demand | 141.37% |
| SILVERBEES | Nippon India Silver ETF | Physical silver prices with exposure to global demand trends | 140.82% |
The U.S. commodity ETF universe is far broader, spanning precious metals, energy, industrial metals and agriculture. Investors can choose between physically backed, futures-based and diversified commodity ETFs, allowing more precise positioning across inflation hedging, cyclical exposure and long-term structural themes.
Commodity ETFs Available in the U.S.
| Ticker Symbol | ETF Name | What It Tracks | 1 Yr Performance |
|---|---|---|---|
| GLD | SPDR Gold Shares | Physical gold prices via allocated bullion | 65.30% |
| SLV | iShares Silver Trust | Physical silver prices and global silver demand | 127.68% |
| PPLT | abrdn Physical Platinum Shares ETF | Physical platinum prices backed by bullion | 113.36% |
| PALL | abrdn Physical Palladium Shares ETF | Palladium prices driven by auto-catalyst demand | 86.18% |
| DBC | Invesco DB Commodity Index Tracking Fund | Broad basket of energy, metals and agriculture | 8.42% |
| CPER | United States Copper Index Fund | Copper prices linked to industrial and EV demand | 29.81% |
Apart from the ETFs listed above, U.S. markets also offer targeted commodity exposure to agricultural products such as corn and wheat, whose prices are influenced by planting cycles, weather conditions, and global food demand. Investors can also access energy commodities, including crude oil and natural gas, which are driven by supply dynamics, geopolitical developments, and shifts in global energy consumption.
How Investors Should Use Commodity ETFs
Commodity ETFs work best as diversifiers rather than core holdings. Most portfolio strategies allocate a modest portion, often 5 to 15%, depending on risk tolerance and macro conditions, as commodities can experience prolonged drawdowns when global growth slows or the dollar strengthens.
For Indian investors, platforms such as Appreciate make it easier to access U.S.-listed commodity ETFs alongside domestic gold and silver ETFs, enabling broader global diversification while keeping allocations measured and transparent.
Conclusion
Commodity ETFs offer a practical way to diversify portfolios with assets driven by global supply and demand rather than corporate profits alone. From gold and silver to energy and industrial metals, these instruments allow investors to participate in macro trends without operational complexity. As inflation risks, geopolitical shifts, and energy transitions continue to shape markets, commodity ETFs are likely to remain a relevant if carefully used tool in long-term portfolio construction.
Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing.
