In recent weeks, commodities and the exchange-traded funds that track their prices have experienced a significant resurgence, with oil and precious metals leading the charge.

Geopolitical tensions, including conflicts in the Middle East and related concerns over potential supply chain disruptions, have fueled sharp price increases in energy markets.

Oil’s resurgence is also due to the extension of production cuts by OPEC+ nations, while precious metals like gold and silver are benefiting from investor demand for safe-haven assets amid inflation concerns and wider uncertainty following last week’s hot jobs reports.

This resurgence has boosted commodities ETFs, such as the United States Oil Fund (USO), SPDR Gold Shares (GLD), and the iShares Silver Trust (SLV), as investors look to capitalize on their respective benchmark’s price movements.

Through Oct. 3, USO and GLD have each gained more than 6% in the past four weeks, doubling the 3% gain for the stock proxy SPDR S&P 500 ETF Trust (SPY), while SLV has more than tripled that with a 14% gain.

The price gains in commodities ETFs highlight their role as both inflation hedges and crucial assets during periods of market volatility.

Commodities ETFs: Factors Contributing to Surging Prices

Commodities have been performing well lately due to a mix of economic, geopolitical, and supply-demand factors:

• Geopolitical tensions: Investors often turn to commodities as safe-haven assets during times of geopolitical instability, such as the Israel-Iran conflict, which increases demand and pushes prices higher.

• Supply chain disruptions: Disruptions from strikes, logistical bottlenecks, and oil production cuts by OPEC+ countries like Saudi Arabia and United Arab Emirates limit supply, driving up crude prices.

• Inflation concerns: Commodities often serve as a hedge against inflation. As inflationary pressures continue globally, driven by higher labor costs, supply chain issues, and resilient consumer demand, investors seek commodities to preserve purchasing power. Friday’s hotter-than-expected payrolls report revived inflation concerns.

• Monetary policy and currency fluctuations: With the Federal Reserve recently cutting interest rates, the U.S. dollar has weakened. A weaker dollar makes dollar-denominated commodities cheaper for foreign buyers, boosting demand.

• China stimulus: China, one of the largest consumers of raw materials, cut its key interest rate less than a week after the Federal Reserve’s jumbo cut. Investors may be pricing in increasing demand for commodities in China, especially as it recovers from its slower growth phase. Industrial metals like copper and aluminum are benefiting from China's infrastructure projects.