In our paper Gold: the most effective commodity investment, we highlighted:
- gold is not a typical commodity
- it is the most effective commodity investment and
- it is under-represented in commodity indices.
Interestingly, developments in the performance and liquidity of the broad commodities market have led two major commodities indices -The S&P GSCI and Bloomberg Commodity (BCOM) Index - to adjust their composition, partly addressing the third point. Both indices recently announced that for a second year in a row, their weighting of gold will increase.
Specifically (in 2021):
- Gold will have the largest individual commodity weight increase in the S&P GSCI, and
- Gold will have its highest weight ever in the BCOM, which also takes the precious metals weight of the index to all-time levels.